Applied Materials, Inc. (NASDAQ: AMAT) offers materials engineering solutions used to produce virtually every new chip and advanced display in the world.

Key Highlights:

• In FY21, the company’s net sales grew 34% on y-o-y basis to USD 23,063 million, supported by strong growth from the semiconductor systems and applied global services.
• Net income stood at USD 5,888 million in FY21, surged from USD 3,619 million in FY20.
• Free cash flow of the firm surged to USD 4,774 million, significantly higher than USD 3,382 million in pcp.
• At the end of Q4FY21, the company reported its quick ratio 1.86x, lower than the industry median 2.40x. Moreover, the company’s current ratio stood at 2.54x, lower than the industry median of 3.15x.

Stock Recommendation:

For Q1FY22, the company expects its revenue in between USD 6.16 billion, wherein semiconductor systems would expect to likely to contribute USD 4.46 billion, while USD 1.33 billion is expected from Applied Global Services.  The stock of AMAT has corrected ~9% and ~11% in the last one month and three months, respectively. The stock of AMAT is available at a higher valuation of P/E multiples of 16.2x on NTM basis, as compared to the industry (Semiconductors & Semiconductor Equipment) median of 7.7x. Hence, considering the aforesaid facts, we give a ‘Watch’ stance on the stock of AMAT at the closing price of USD 136.13 on February 07, 2022.  

One-Year Technical Price Chart (as on February 07, 2022). Analysis by Kalkine Group

Note: The reference data in this report has been partly sourced from REFINITIV.