Applied Materials provides manufacturing equipment, services and software to manufacturers of semiconductor wafers and chips. With a slowdown in the overall semiconductor market, the company’s revenues took a 4% hit last year as major manufacturers including Intel and Samsung cut their capital expenditure. However, with a revival in sight and strong company fundamentals we are positive on the long term outlook of the company.
Silicon wafer fab equipment and related services account for 84% of our price estimate of $14.83. Since our valuation for Applied stands at a premium of around 40% to the current market price, let’s take a look at some likely trends in the semiconductor equipment market that might negatively impact our valuation for the company.