Chip Stock Banks All-Time High Before Ringing in New Year

AMAT has increased nearly 85% over the past year

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Applied Materials, Inc. (NASDAQ:AMAT) stock is coming off a fresh record high of $163.02, touched on Dec. 29, and boasts a solid year-to-date lead of 84.6%. The equity has seen plenty of support from its moving averages year, most notably its 200-day trendline, which captured an early October pullback, and more recently, its 50-day moving average. Applied Materials also offers a forward dividend of $0.96 with a dividend yield of 0.60%.

amat dec 30

Despite this positive price action, the options pits have been sceptical, and an unwinding of some of this pessimism could put additional wind at the equity's back in 2022. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMAT sports a 10-day put/call ratio that stands higher than 76% of annual readings, meaning long puts are more popular than usual. Plus, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.58 stands higher than 89% of readings from its 12-month range, suggesting short-term options traders have rarely been more put-biased. 

From a fundamental point of view, Applied Materials stock's valuation seems to be the biggest concern for investors amid AMAT’s incredible bullish run. The stock trades at price-earnings ratio of 24.86 and a price-sales ratio of 6.09, which are both fairly high values. However, AMAT also has a forward price-earnings ratio of 18.69, indicating an expected increase in future earnings.

The forward price-earnings ratio also presents a more attractive valuation, given Applied Materials’ growth rate over the past couple of years. Since fiscal 2019 Applied Materials has increased its revenues and its net income by 58% and 118%, respectively. AMAT also has a manageable balance sheet with $5.46 billion in cash and $5.75 billion in total debt, making the security a low-risk option for long-term investors.


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