4. Applied Materials, Inc. (NASDAQ:AMAT)
% Decline Over Past 1 Year: ~22%
Number of Hedge Fund Holders: 80
Market Cap as on March 7: $126.4 billion
Applied Materials, Inc. (NASDAQ:AMAT) is engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. Stifel analysts reiterated the “Buy” rating on the company’s stock, maintaining a price target of $235.00. There are expectations of stability in advanced foundry and logic segments. Brian Chin, an analyst of Stifel, remains optimistic about Applied Materials, Inc. (NASDAQ:AMAT)’s outlook, lauding the potential to sustain growth amidst the current challenges.
For Q2 2025, the company is encouraged by the trends aiding continuing customer investments to enable leading-edge technology inflections, while taking into consideration export control related headwinds. For Q2 2025, Applied Materials, Inc. (NASDAQ:AMAT) expects total net revenue of $7,100 million (+/- $400 million), and a non-GAAP gross margin of ~48.4%. Overall, the semiconductor equipment industry continues to experience a period of transformation fueled by the higher demand for advanced chips throughout various sectors. Applied Materials, Inc. (NASDAQ:AMAT)’s competitive advantage revolves around its broad portfolio of technologies enhancing chip efficiency and enabling advanced packaging solutions.
Vltava Fund, an investment management company, published its Q4 2024 investor letter. Here is what the fund said:
“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.
Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)