Can AMAT Lead the Display Market With Advanced OLED and AR/VR Push?

Core Insights - Applied Materials' display business has shown significant recovery in fiscal 2025, achieving a year-over-year growth of 19.8%, with a remarkable 68.2% growth in the fourth quarter due to a richer mix of advanced systems and broad price increases [1][11] Group 1: Business Performance - The gross margin for Applied Materials' display business reached 48.8%, marking the highest level in 25 years, with a year-over-year increase of 120 basis points [2] - The company has benefited from the growing adoption of organic light-emitting diodes (OLED) in various devices, supported by its MAX OLED technology, which allows for the production of larger OLED screens with enhanced brightness and durability [3][4] Group 2: Strategic Initiatives - Applied Materials is focusing on advanced display technologies and is preparing for the transition to next-generation MAX OLED displays in 2026, while also innovating in the augmented reality (AR) and virtual reality (VR) sectors [4] - The company is collaborating with Avegant to develop lightweight smart glasses that utilize advanced waveguide and light-engine technology, targeting the AR and VR display market, which is projected to grow at a CAGR of 35.6% to reach $8.2 billion by 2028 [5] Group 3: Competitive Landscape - Competitors such as Universal Display Corporation and Kopin Corporation are significant players in the OLED market, holding extensive patent portfolios that contribute to their licensing revenues and market presence [6][7] - While these competitors do not directly manufacture equipment like Applied Materials, their patents for underlying technologies position their customers as direct competitors [8] Group 4: Financial Metrics - Applied Materials' stock has increased by 74% over the past six months, outperforming the Zacks Electronics - Semiconductors industry, which saw a 23% increase [9] - The company currently trades at a forward price-to-sales ratio of 8.66X, which is lower than the industry average of 12.43X [12] - The Zacks Consensus Estimate for fiscal 2026 and 2027 earnings indicates year-over-year growth of 1.17% and 19.91%, respectively, with recent revisions showing a downward adjustment for 2026 and an upward adjustment for 2027 [15]