CEO Warning Dampens AMAT's Earnings Beat

Applied Materials also forecast fiscal fourth-quarter sales above expectations

Deputy Editor
Aug 16, 2019 at 10:06 AM
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Chip concern Applied Materials, Inc. (NASDAQ:AMAT) is sinking this morning, after CEO Gary Dickerson said a recovery in the memory chip market is unlikely before 2020. Dickerson also said that he expects 2019 revenue to come in about one-third lower than the previous year. This is overshadowing the chipmaker's fiscal third-quarter revenue and fourth-quarter sales outlook, both of which beat analysts' expectations. As such, AMAT stock is down 5% to trade at $44.80. 

On the charts, AMAT is set to end beneath its 40-day moving average -- an area of recent support that the equity has finished south of only once in the past two months. And while the stock still boasts a 37% year-to-date gain, it has cooled roughly 15% since its late-July high of $52.45. 

The disappointing forecast for chip recovery hasn't spooked many analysts, though. While Craig-Hallum slashed its price target to $46 from $50, Cowen and Morgan Stanley lifted their AMAT targets to $55 and $43, respectively. Should the shares extend today's downturn, more bear notes could be on the horizon for AMAT, considering there are nine analysts calling the stock a "buy" or better, compared to only six saying "hold."

Elsewhere, several short sellers are likely cheering today. In the last two reporting periods, short interest rose 10.7%. There's still plenty of room for bearish bets, though, with the 19.17 million shares sold short representing only a slim 2% of the stock's available float. 

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