What Could Drive Applied Materials’ Long-Term Revenue Growth?
Applied Materials stock rose 18% last month
Applied Materials (AMAT) stock rose 18.3% in September 2017 to close the month at $52.09. It’s trading 89.0% above its 52-week low of $27.56 and 1.0% below its 52-week high of $52.63. In the last 12 months, the company has generated returns of 76.0% after rising 75.0% in 2016.
Last week, Applied Materials announced its financial outlook for the next three years and outlined how it expects to enter high growth areas. According to the company’s press release, “Materials innovation is enabling a new era of computing to make possible IoT, big data and artificial intelligence (A.I.).”
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TAM of $45 billion in wafer fab equipment space
Applied Materials expects a non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $5.08 in fiscal 2020 compared to $1.75 in fiscal 2016. It expects increases in market share, research and development, and profit margins. AMAT has estimated TAM (total available market) in WFE (wafer fab equipment) at $45.0 billion.
AMAT expects high growth areas such as big data and AI to increase demand for semiconductor processing and storage. Applied Materials has a diverse product portfolio, which might help it keep pace with industry standards and requirements. To process and compute large amounts of data will mean an improvement in logic and DRAM (dynamic random access memory) NAND (NOT AND) capacity.
AMAT expects revenue from its Services segment to rise at a CAGR (compound annual growth rate) of 15.0% over the next three years to $4.5 billion. It also expects its Display vertical to grow ~23.0% annually in the same period, driven by demand in the smartphone and television markets.