AMAT - Applied Materials

[brycepeterson]

Anyone own or looking at AMAT?  The share price is quite volatile, creating good long-term entry points, or trading opportunities, depending on your style.  It's down from $59 to $50 during this market softness.  Cheap on a FCF/EV basis.  I'm curious on the negatives keeping you out of the business, or positives that attract you.  Check out the #'s:

 

Price tag:  $50/share, market cap $53.8 billion, EV $53.4 billion ($400 million net cash).

 

2017:  FCF $3.3 billion = 6.1% FCF on EV ($3.12 EPS)

2018E: FCF $4.5  billion = 8.1% FCF on n eV ($4 EPS)

 

A few positives:  (A) At fore-front of increased chip/technology used in all aspects of life (AMAT = like the "pick and shovel" supplier to chip industry).  (B) Capital allocation - very good stock buyback effectiveness - diluted share count drops materially per each dollar spent on buybacks (compare to Google = poor stock buyback effectiveness in dropping diluted share count); plus it's a low-capex biz model, which I love. 

 

Negatives:  (A) Shares trade at cheap valuation partially because I think some are skeptical on the semi-conductor earnings cycle (AMAT's customers will eventually experience a downturn...AMAT's revenue will decline in sympathy...like a CAT or oil-field services cycle).

 

Thanks for thoughts. / Bryce

 

[John Hjorth]

Hi Bryce,

 

I have a small position in this company. [Only I, no other family members so far involved in my messing around.]

 

I like a lot what I see and read, while thinking megatrends. It's to me a wonderful company, contributing to change the world to a better place for all of us.

 

So far, I haven't thought deeper about how to value the company, but I will.

 

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Please change the topic title to : AMAT - Applied Materials [ref. board syntax & rules.]

 

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A belated welcome to you here on CoBF, Bryce.

[nickenumbers]

All,

 

I wanted to see if anyone had some opinions on AMAT?  It is a large repurchaser of it's own stock, and it is using it's operating cash flow to fund the share repurchases.  [bless You- Henry Singleton Teledyne.]

 

It looks to be a very well run company.  The semiconductor industry has the disadvantage of being cyclical, and the stock price has already taken a beating in the last 12 months, down from $62.  We have the theme of IOT, AI, and the world becoming more connected via devices, and cloud computing.

 

The quick valuation that I performed had me with a DCF around $43-50, so the price today of $32 looks interesting.  I would be thinking about it as a 2-3 year hold, maybe longer.

 

Thoughts or opinions.