After Q3 earnings and chip market optimism, Applied Materials' stock has risen

After Q3 earnings and chip market optimism, Applied Materials' stock has risen ...

AMAT's stock jumped modestly higher on Friday, as the semiconductor equipment company reported better-than-expected third quarter results and a good, but cautious, near-term outlook.

Adjusted earnings for the three months ended in July, the group's fiscal third quarter, increased by 2% from last year to $1.94 per share, firmly exceeding the Street consensus of $1.79 per share. Revenues increased by 5.1 percent to $6.52 billion.

Applied Materials said it expects to generate $6.65 billion in current quarter revenues, with a $400 million error margin on either side, even as CEO Gary Dickerson cautioned that the company will remain "supply-constrained" for the "several quarters."

The group has reduced its estimate for the 2022 wafer fab equipment industry to $90 billion, but said its own WFE revenues would increase by 15% in the next fiscal year. It also expects to slow hiring in order to ensure complete funding of R&D programs.

"Memory expenditure is expected to be lower than in 2022 as macro uncertainty and weakness in consumer electronics and PCs cause these customers to postpone some capacity additions," CEO Gary Dickerson said on a conference call late Thursday.

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"Leading-edge foundry-logic looks strong with customers fighting for leadership and racing to be the first to implement significant technological shifts," said he. "These customers serve a broad and varied application. They're seeing softness in consumer-centric markets, which are being impacted by macroeconomic factors."

In pre-market trading, Applied Materials shares were 0.1 percent higher, indicating a opening bell price of $108.36.

"Demand continues to outpace the supply, but weaker memory and consumer-centric applications are creating uncertainty for 2023," said D.A. Davison analyst Thomas Diffely, who reduced his price target on the group by $15 to $155 per share, while keeping his 'buy' rating intact following last night's earnings.

"Although market demand continues to outpace supply, the current market environment remains problematic (constrained global supply, weakening memory investments, and softness in consumer markets," said the executive. "That said, the company should benefit from large backlog levels (3 quarters worth), longer term visibility from its customers, and substantial capacity investments."

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