- After barely budging at first in response to its FQ3 report - it featured a slight revenue miss, in-line EPS, light FQ4 guidance, and healthy order data - Applied Materials (NASDAQ:AMAT) has sold off to new 52-week lows today. Lithography equipment giant ASML is also off.
- Possibly weighing: On its earnings call (transcript), AMAT forecast 2015 wafer fab equipment (WFE) sales would be flat Y/Y (below a prior forecast for 3% growth), with potential downside risk. Lower-than-expected foundry capex is ,ostly blamed; memory capex remains strong, and (in spite of Intel's recent $1B capex budget cut) Applied's logic outlook is unchanged.
- Several firms have cut their targets. Pac Crest's Weston Twigg (Outperform, target cut by $4 to $23): "We are concerned that foundry demand is softening due to end-market weakness, which could last several quarters. Worse, if 16/14 nm ramps slow down, and 10 nm capacity is limited to smaller pilot lines next year, foundry capex could decline in 2016. We also expect Intel's capex to remain low next year as it maximizes equipment reuse amid low PC demand."
- Semiconductor Advisors' Robert Maire thinks company-specific issues are also weighing. "AMAT is better off than KLAC which is a purer play linked to the weak foundry/logic space but weaker than LRCX which has a better memory and multipatterning exposure. This dynamic is not likely to change in the near term given Applied's product mix including its process diagnostics group. Though AMAT may claim otherwise, we are not sure that AMAT is gaining significant share versus Lam overall."
- Jefferies' Sundeep Bajikar (Buy, target cut by $3 to $25) is still a believer. "Strong order growth and optimism about share gains in 3D NAND reinforces our secular thesis, and is likely to be a positive surprise for investors. While we believe our foundry competition thesis is also playing out, we misjudged timing of foundry orders. However, following CapEx cuts from TSMC and Intel we think foundry weakness was baked into the stock, which has declined 32% YTD (vs. SOX -8%) in spite of solid fundamentals. AMAT remains one of our top picks.”
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AMAT's FQ3 results, guidance/orders