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AMAT – Market expectations are for Uniform ROA expansion, but management may have concerns about revenue growth, new products, and demand

April 9, 2021

  • Applied Materials, Inc. (AMAT:USA) currently trades at recent highs relative to UAFRS-based (Uniform) earnings with a 21.0x Uniform P/E. At these levels, markets have bullish expectations for the firm, but management may have concerns about revenue growth, new product offerings, and the sustainability of wafer demand
  • Specifically, management may lack confidence in their ability to optimize new structures and materials, capitalize on their clients’ geographic expansion, and sustain growth in their service business through technological innovation. Furthermore, they may be exaggerating the potential of their new source technology for electron optics as well as the capabilities of their e-beam products. Moreover, management may lack confidence in their ability to sustain overall revenue growth, continue gross margin improvement across all segments, and assist customers with their technology roadmap strategies. They may also have concerns about their new integrated hybrid bonding system partnership as well as the sustainability of demand, particularly in the WFE market