Applied Materials (AMAT) Stock Analysis

October, 5th, 2022

Table of Contents

Quick Stock Overview
Applied Materials by the numbers.

1. Executive Summary
A brief discussion of Applied Materials and its potential appeal to value investors.

2. Extended Summary
A more detailed explanation of Applied Material’s business and competitive position.

3. Semiconductors are the new oil
The vital role of semiconductor supply in modern economies.

4. Reshoring the semiconductor industry
Semiconductors are now a strategic resource, and one under threat.

5. Applied Materials Business
The strength of the business model and the company’s outlook.

6. Applied Materials Financial Results
AMAT profitability and growth.

7. Conclusion

Quick Stock Overview

Ticker: AMAT

Key Data

• Industry: Semiconductor equipment

• Market Capitalization ($M): 79,475

• Price to sales: 3.3

• Price to Free Cash Flow: 16.7

• Dividend yield: 1.08%

• Sales ($M): 25,159

• Free cash flow/share: $5.53

• P/E: 12.4

1. Executive Summary

Semiconductors are turning from a key industry to a potential geopolitical flashpoint. Semiconductor manufacturing is concentrated in a small, politically volatile area of northeast Asia. The pandemic-driven chip shortage has turned this key vulnerability into a policy concern.

This has led to a move to rebuild Western chip production capability. This is parallel to an increasing number of applications and inventory rebuilding which will keep chip demand high for years.

Geopolitical incentives and chip demand are driving a massive build-up in new semiconductor foundries. Each of these new foundries will rely on Applied Materials (NASDAQ: AMAT) for state-of-the-art machinery and systems.

As the leader of the upstream segment of the supply chain, Applied Materials is ideally positioned to benefit from this trend. It provides an opportunity for investors to bet on the industry without having to understand all the intricacy of leading-edge chip technology and decide which chipmaking specialist will prevail.

AMAT is also fairly valued, despite a very strong growth profile and a solid balance sheet.