Applied Materials pops on strong FQ1; analyst considers it 'top undiscovered AI play'

Applied Materials (NASDAQ: AMAT) reported better-than-expected FQ1 2024 results and released a strong outlook for the April quarter, resulting in a 13% surge in its shares in premarket trading Friday.

The materials engineering solutions provider posted earnings per share (EPS) of $2.13 for the quarter, exceeding analyst expectations of $1.90. Revenue grew to $6.71 billion, outpacing the consensus estimate of $6.48 billion.

AMAT also reported generating $2.33 billion in cash from operations during the quarter, with a non-GAAP operating margin of 29.5%, which remained stable compared to the previous year.

For FQ2 2024, Applied Materials forecasts its EPS to range between $1.79 and $2.15, slightly above the consensus projection of $1.78.

Revenue is anticipated to be around $6.5 billion, plus or minus $400 million, compared to the $6.32 billion expected by analysts.

“Applied Materials delivered strong results in the first quarter of fiscal 2024 and has outperformed our markets for the fifth consecutive year,” said Gary Dickerson, President and CEO of Applied Materials.

“Our leadership positions at key semiconductor inflections support continued outperformance as customers ramp next-generation chip technologies critical to AI and IoT over the next several years.”

The company's recent earnings report and guidance have further reinforced Jefferies' bullish stance, solidifying its position as a Top Pick.

"We view AMAT as an undiscovered AI play, as AI chips are driving the size of chips larger and expect AMAT to re-rate to a 20% premium to the SPX over the next several years as the market appreciates its secular drivers," equity analyst Vedvati Shrotre said.

By Vahid Karaahmetovic

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