AMAT - Embedded Expectations Analysis - 2021 10 01
Applied Materials, Inc. (AMAT:USA) currently trades at recent highs relative to UAFRS-based (Uniform) earnings with a 16.8x Uniform P/E. At these levels, markets have bullish expectations for the firm, but management may have concerns about the sustainability of semiconductor demand, their PPACt strategy, and the growth potential of Applied PROVision™.Specifically, management may be concerned about the sustainability of strong semiconductor demand, persistent supply chain challenges, and spending changes in China. In addition, they may lack confidence in their ability to maintain strong momentum in the DRAM business, drive growth with the Applied PROVision system, and return free cash flow to shareholders. Furthermore, management may be overstating the benefits from their strategic investments and they may have concerns about lingering technical issues in the OLED market. Moreover, they may lack confidence in their ability to sustain strong momentum in co-optimized and integrated solutions, efficiently execute their PPACt time-to-market acceleration strategy, and reduce wiring throughout their integrated material solutions. Finally, management may be overstating the potential of new packaging technologies and structures, their data generation capabilities using unique imaging and algorithms, and the differentiation of their services business.
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
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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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