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Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

earlier this month was named the top solar photovoltaic (PV) equipment supplier for the fourth consecutive year by market research firm VLSIresearch. Additionally, with revenues of $1.7 billion in 2011, the company crossed the $1 billion mark in sales for the third year in a row.

However, while Applied Materials booked a 16% sequential increase in second-quarter revenues, its energy and environmental solutions division registered a 62% sequential decline on account of excess manufacturing capacity in the solar industry.

While we believe the current year will be tough for solar PV demand, with the global market declining to almost half its current size in 2012, we remain optimistic on the long-term prospects of this segment. With growing awareness about the benefits of renewable energy combined with declining costs, there is bound to be an increase in demand for solar power use.

If the recent findings of Applied Materials' "international solar energy survey" are to be believed, we could see stronger-than-expected demand for solar power. Thus, after a substantial drop this year, we estimate the solar PV equipment market will once again cross the $10 billion mark before the end of our forecast period.


our complete analysis of Applied Materials here


Increased adoption and cost-competitiveness of solar power

Applied Materials' fourth annual solar energy survey was conducted in four countries that have the maximum potential for growth in use of renewable energy: China, India, Japan and the U.S.

Primarily, there are two factors that the solar industry is concerned about:

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    Grid Parity or solar energy power that is cost-competitive with traditional energy prices; and

    Adoption rate of solar power use.

    The outcome of the survey was favorable for both these factors. Over half the respondents believe that solar energy is cheaper than traditional energy sources such as coal, etc. In reality, over the past year, the PV module prices have fallen to below $1/watt, implying that in many countries solar power has become cost competitive with retail energy prices.

    Additionally, more than half of respondents in emerging economies such as India and China felt that the projected rate of solar energy adoption was too slow, and we should have a more optimistic target.

    Solar power could become the energy source for the future

    As the world's population is expected to plateau by 2050, we will need about three times the amount of electricity consumed today. Applied Materials is of the view that solar has the potential to contribute around 30% of this global demand. Since utilities plan infrastructure changes on a 30- to 40-year cycle, the company feels that now is the right opportunity to influence the world's long-term energy supply.

    We believe that with an increasing rate of cost reduction, we will continue to witness an increase in solar PV installation in the coming years. Applied Materials remains committed to its goal of stepping up adoption of solar technology globally, and as it continues to invest in renewable energy awareness programs, we feel the company would benefit in the long run with solar power becoming a more meaningful contributor to global energy.


    has a price estimate of $14.83 for the company, a premium of more than 30% to the current price.

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    This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.