AMAT - Embedded Expectations Analysis - 2020 07 23
Applied Materials, Inc. (AMAT:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings with a 14.6x Uniform P/E. At these levels, markets have bearish expectations for the firm, and management may have concerns aboutSpecifically, they may lack confidence in their ability to sustain etch business revenue growth and meet their semi systems revenue and gross margin outlook. They may also have concerns about the sustainability of foundry/logic and NAND and DRAM demand, and further supply chain disruptions. Furthermore, management may lack confidence in their ability to execute against their record-high semiconductor and service business backlog and the potential of their new optical inspection system. In addition, they may have concerns about the changing technology export regulations in China, increasing freight and logistics costs, and the impact of macroeconomic pressures. Finally, management may be exaggerating the resiliency of their services business during the crisis and their ability to accelerate power, performance, and area/cost over time (PPACt) roadmaps for customers
Applied Materials provides manufacturing equipment, services and software to the semiconductor, display and related industries. The company's segments are: Semiconductor Systems, which develops, manufactures and sells a range of manufacturing equipment used to fabricate semiconductor chips; Applied Global Services, which provides integrated solutions to support equipment and fab performance and productivity; and Display and Adjacent Markets, which is comprised of products for manufacturing liquid crystal displays, organic light-emitting diodes and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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