Applied Materials Mapped Out Its Future. Investors Sold the Stock.

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Technicians at an Applied Materials facility in California, in 2016.

David Paul Morris/Bloomberg

Semiconductor equipment maker

Applied Materials

has outlined its plans for the future, including issuing a new financial model for 2024. But the news, disclosed during an event for investors on Tuesday, doesn’t appear to have pleased investors.

Amid comments from Applied Materials (ticker: AMAT) executives, shares fell 2.5% to close at $139.54 during regular trading Tuesday. The outlook weighed on other equipment makers too:

ASML Holding

(ASML) dropped 2% to $628, and

Lam Research

(LRCX) fell 1.3% to $652.48.

Applied Materials executives outlined their vision for the next several years of business, saying that the semiconductor industry is strategically more important to the global economy than ever before. Driven by technologies such as artificial intelligence, among other things, there is a new wave of silicon consumption in the U.S. and abroad, executives said.

“The AI inflection is driving a new era of innovation and secular market growth. It’s clear that the future isn’t going to be like the past,” Chief Executive
Gary Dickerson
said. “AI computing workloads require new semiconductor solutions at a time when traditional Moore’s Law scaling is slowing down.”

Dickerson said that beyond reacting to surging demand, Applied Materials is shifting more of its business toward subscription-style revenue, and is optimizing its portfolio of products and services to generate more free cash flow and more profitable growth.

The company said it expects fiscal 2024 earnings of $8.50 a share from sales of $26.7 billion. There weren’t enough estimates for 2024 earnings or revenue to accurately report a Wall Street consensus for those numbers, but for fiscal 2023, analysts expect earnings of $6.64 a share and revenue of $23.92 billion.

Of the company’s projected 2024 sales, $18.4 billion is expected from its chip manufacturing equipment, $6.1 billion will arrive from services, and $2.2 billion will be related to its display segment.

Ahead of the event, several sell-side analysts had increased their targets for the stock price. Credit Suisse analysts John Pitzer wrote in a client note Sunday that Tuesday’s event may be considered a “sell-the-news” opportunity, but that doing so would be a mistake.

Shares of the equipment maker advanced 202% in the past year, as the PHLX Semiconductor index, or Sox, rose 105%. The

S&P 500

index gained 53%.

Write to Max A. Cherney at [email protected]

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