"AMAT is an underappreciated technology leader, in our view. We expect AMAT to benefit from multiple technology inflections in the next two to three years, which could drive wafer fabrication equipment (WFE) spending to $36 to $37 billion," analysts said about the Santa Clara-based provider of manufacturing equipment, services and software to the global semiconductor industry.
"The merger with TEL creates an entity with approximately 32% market share and enough scale to drive operating leverage. Combined with aggressive share repurchases, we see EPS of about $2 in 2016E and about $2.50 in 2017E," analysts added.
Shares of Applied Materials are up 0.84% to $25.25 in pre-market trading.
Separately, TheStreet Ratings team rates APPLIED MATERIALS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate APPLIED MATERIALS INC (AMAT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 53.33% and other important driving factors, this stock has surged by 46.89% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- APPLIED MATERIALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, APPLIED MATERIALS INC increased its bottom line by earning $0.89 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $0.89).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 58.5% when compared to the same quarter one year prior, rising from $183.00 million to $290.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 13.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- AMAT's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AMAT has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: AMAT Ratings Report