Applied Materials Stock Jumped More Than 3.5x Since 2018: Here’s Why

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AMAT: Applied Materials logo
AMAT
Applied Materials

Applied Materials Inc. (NASDAQ: AMAT) stock price rose 3.6x from $32 in 2018 end to around $120 currently, primarily due to favorable changes in its P/S multiple. During this period, the company also witnessed a 49% rise in revenues and a 13% drop in the outstanding share count. Due to this, the company’s stock price has rallied and managed to outperform the S&P 500, which returned a little over 60% during the same period.

In our interactive dashboard, Why Applied Materials Stock Moved: AMAT Stock Has Gained 265% Since 2018, we break down the factors behind this move.

(A) AMAT’s Total Revenue has risen 49% from $16.7 billion in FY 2018 to $24.8 billion currently

  • AMAT’s total revenue initially dropped to $14.6 billion in FY ’19 before rising to $17.2 billion in FY ’20 as demand started picking up (AMAT’s fiscal year ends in October).
  • Further, demand has surged since, and sales rose to $23.1 billion in FY ’21, and currently stand as high as $24.8 billion on an LTM basis.
  • Semiconductor systems sales make up the bulk of Applied Materials’ revenues, with $6.68 billion of the company’s sales coming from this segment as of FY ’21, making up almost 60% of total revenue.
  • For details about AMAT’s EBITDA and comparison to peers, see Applied Materials (AMAT) EBITDA Comparison
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(B) Revenue per share (RPS) increased 72% from $16.50 in FY 2018 to $28.30 currently

  • AMAT’s revenue rose from $16.7 billion in FY 2018 to $24.8 billion currently, while the outstanding share count dropped from 1 billion in FY 2018 to around 0.9 billion currently.
  • Due to this, RPS has jumped 72% from $16.50 in FY ’18 to $28.30 currently.

(C) Price-To-Sales (P/S) multiple for AMAT rose strongly from 1.7x in 2018 to 5.9x by 2021 end but has pulled back to 4.2x currently, still around 2.5x higher than its 2018 level

  • AMAT’s P/S multiple rose strongly to around 5.9x by late 2021, on the back of rising investor expectations surrounding increased demand for its semiconductors, leading to a rise in the company’s sales.
  • However, due to the current geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 4.2x.
  • For additional details about the company stock returns and comparison to peers, see Applied Materials (AMAT) Stock Return Comparison.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 AMAT Return 6% -25% 263%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio 0% -17% 225%

[1] Month-to-date and year-to-date as of 5/31/2022
[2] Cumulative total returns since the end of 2016

 

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