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Applied Materials (AMAT) Gains But Lags Market: What You Should Know

Zacks Equity Research

Applied Materials (AMAT) closed at $51.03 in the latest trading session, marking a +0.59% move from the prior day. The stock lagged the S&P 500's daily gain of 0.69%. Meanwhile, the Dow gained 0.65%, and the Nasdaq, a tech-heavy index, added 0.58%.

Prior to today's trading, shares of the maker of chipmaking equipment had gained 19.84% over the past month. This has outpaced the Computer and Technology sector's gain of 2.27% and the S&P 500's gain of 1.36% in that time.

AMAT will be looking to display strength as it nears its next earnings release, which is expected to be August 15, 2019. In that report, analysts expect AMAT to post earnings of $0.70 per share. This would mark a year-over-year decline of 41.67%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $3.53 billion, down 21.08% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $2.97 per share and revenue of $14.47 billion. These totals would mark changes of -33.26% and -16.16%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for AMAT. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. AMAT currently has a Zacks Rank of #4 (Sell).

Valuation is also important, so investors should note that AMAT has a Forward P/E ratio of 17.06 right now. This valuation marks a no noticeable deviation compared to its industry's average Forward P/E of 17.06.

Also, we should mention that AMAT has a PEG ratio of 2.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AMAT's industry had an average PEG ratio of 2.33 as of yesterday's close.

The Semiconductor Equipment - Wafer Fabrication industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 215, which puts it in the bottom 17% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow AMAT in the coming trading sessions, be sure to utilize Zacks.com.


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