Applied Materials share: Chart from 06.06.2025, price: 164 USD - symbol: AMAT | Source: TWS
Outlook and valuation
Over the past five years, sales have increased massively from USD 17.2 bn to USD 27.2 bn.
At the same time, the number of outstanding Aktien shares outstanding has been sharply reduced from 916 to 827 million and earnings have climbed from USD 4.17 to USD 8.65 per share.
There has not been a single year in which sales and profits have not increased, yet the share price has repeatedly plummeted. The market appears to be overestimating Applied Materials' vulnerability to the economic cycle and underestimating the moat.
In the second quarter, earnings of USD 2.39 per share exceeded expectations of USD 2.30. With sales of USD 7.10 billion, the company met analysts' estimates.
For the year as a whole, this corresponds to a 7% increase in sales and a 14% jump in profits.
Surprisingly, this was achieved despite the fact that business in China collapsed due to trade restrictions. Over the year as a whole, turnover fell from USD 2.83 billion to USD 1.77 billion and the share of total business fell from 43% to 25%.
Insider strikes
According to consensus estimates, earnings are expected to rise by 10% to USD 9.51 per share in the current financial year.
Applied Materials thus has a forward P/E of 17.3, which is roughly in line with the average valuation of the last five years.
Since earnings rose by 12% in the first quarter and by 14% in the second quarter, it is reasonable to assume that the consensus estimates are too low.
In any case, CEO Dickerson seems to have come to the conclusion that this is an opportunity and bought USD 6.87 million worth of shares at a price of USD 137.30 on April 3.
Dickerson currently holds 1.7 million shares and seems to have a knack for timing. He has sold shares near the high in both 2024 and 2022.
If a sustained return above USD 159 is achieved, a procyclical Kaufsignal with a possible Kursziel at USD 175. Above this, the path towards USD 193 and USD 200 would be clear.
However, if the share falls below USD 159, further losses to USD 154 and USD 142 must be expected.
Trench assessment and full article at the link: