Applied Materials (AMAT) stock has seen a solid year so far, with a rise of over 30% year-to-date, outperforming the Nasdaq-100. The company had a mixed 2023 due to weak semiconductor capital spending, but there are signs of improvement. In Q1 FY’24, revenue was flat at $6.71 billion, and adjusted earnings rose by 5% to $2.13 per share. The semiconductor downcycle may have bottomed out, with memory prices increasing and PC sales expected to improve. Demand from the artificial intelligence space is also on the rise, benefiting companies like Applied Materials. Additionally, China’s focus on developing its own semiconductors has increased the demand for products and services from U.S. companies like Applied.
AMAT stock has had strong gains, rising by 145% from early 2021 to around $210 currently, compared to a 40% increase for the S&P 500. However, the stock’s returns have been inconsistent, with gains of 82% in 2021, a decline of 38% in 2022, and a 66% increase in 2023. In comparison, the S&P 500 had returns of 27% in 2021, a -19% decline in 2022, and a 24% increase in 2023. The volatile nature of individual stocks in recent years has made it difficult for them to consistently beat the S&P 500, but a portfolio of high-quality stocks has outperformed the benchmark annually. With the current uncertain macroeconomic environment, there are questions about whether AMAT will continue to see strong gains or underperform in the next 12 months.
Applied Materials stock is currently trading at around $210 per share, with a valuation of about 28x projected FY’24 earnings. While the multiple is slightly high compared to historical levels, the stock is considered fairly priced. Trends such as generative AI and cloud computing could drive the stock higher. The company has also expanded into the lithography space, competing with Dutch giant ASML. Our analysis values Applied Materials stock at $202 per share, in line with the current market price. Investors can consider investing in Trefis Market Beating Portfolios for more insights and price estimates on various stocks.
Overall, Applied Materials has shown resilience in a challenging semiconductor market, with signs of improvement in its financial performance. The company’s diversification across the semiconductor production value chain and exposure to growing demand from the AI space are positive factors driving its stock performance. While there have been fluctuations in AMAT stock returns, the company’s strategic initiatives and potential for growth in emerging technologies make it an attractive investment option. With the current macroeconomic uncertainties, investors are advised to monitor the company’s performance closely to assess any potential risks and opportunities in the market.
