Applied Materials stock price has staged a strong rally this year and is now hovering near its all-time high. AMAT was trading at $230, lower than the record high of $252, and 87% above the lowest level this year. 

Applied Materials earnings preview

Applied Materials is a top company that provides products that are widely used in the technology industry. Precisely, it provides its products to companies like TSMC, Micron, SK Hynix, Intel, and Samsung. 

AMAT’s biggest business is in the semiconductor manufacturing equipment industry, where it provides products used in deposition, etching, metrology and inspection, and ion implantation. 

Applied Materials is benefiting from the ongoing artificial intelligence (AI) trend in the United States and other countries. While it does not manufacture these chips itself, its technology is used by amost all companies in the industry. 

The next important catalyst for the AMAT stock price will be its financial results, which will provide more information on its revenue growth and margins.

There are chances that its business will report strong numbers now that some of it clients like Samsung, TSMC, and Global Foundries have all published strong financial results. 

The most recent numbers revealed that Applied Materials revenue rose by 8% in the third quarter to $7.3 billion. Its net income rose by 4% to $1.77 billion, while its operating margin rose to 30.6%.

Analysts, based on the management’s guidance, expect that this week’s results will show a deceleration of revenue. The average estimate among analysts is that its revenue fell by 5.24% to $6.88 billion, bringing the annual figure to $28.26 billion. In the recent statement, the management said:

“We are expecting a decline in revenue in the fourth quarter, driven by both digestion of capacity in China and nonlinear demand from leading-edge customers given market concentration and fab timing.” 

AMAT valuation concerns remain

The main concern about Applied Materials is that it is relatively overvalued, especially for a company whose growth has slowed recently. 

The company has a forward price-to-earnings ratio of 27, higher than the S&P 500 Index average of 22.7. Its PEG ratio, which includes the price-to-earnings multiple and growth, has jumped to 3.21, which is higher than the sector median of 1.75.

The other risk is that the AMAT stock price is higher than the average estimate among analysts. These analysts expect that the stock will drop to $214. 

Applied Materials stock price analysis

AMAT stock chart | Source: TradingView

The weekly chart shows that the AMAT stock price has rebounded in the past few months, moving from a low of $122.8 in March to a high of $242 this week. It has remained above the 50-week and 200-week Exponential Moving Averages (EMA), a sign that bulls are in control.

The stock is now nearing the all-time high of $252, where it may form the risky double-top pattern whose neckline is at $122, its lowest level in April this year. 

Therefore, the most likely AMAT stock price forecast is bearish as long as it remains below the double-top level of $252. A move above that level will point to more gains, potentially to the psychological point at $260.

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