Our Game Plan for Applied Materials and Its Earnings Report After the Close

Coming up after the close, Applied Materials (AMAT) will deliver its results for April quarter. The market is calling for EPS $2.68, 12% year over year, on revenue of $7.68 billion, up 8% year over year.

As we’ve seen so far this earnings season, guidance is key. For Applied, the consensus outlook for the current July quarter calls for EPS of $2.90 on a range between $2.55-$3.17, and the $2.48 posted in the year-earlier quarter. Revenue is expected to come in at $8.15 billion ($7.85 billion-$9.1 billion range).

During Applied’s February earnings call, management said that it sees the semi-equipment business growing “more than 20% this calendar year” with stronger performance in the second half of the year.

At the Cantor Global Technology & Industrial Growth Conference on March 10, Applied commented that the semiconductor industry is constrained, and it does not see that changing in the foreseeable future. Add in Taiwan Semiconductor’s (TSM) increased multi-year outlook for the semiconductor industry that is 50% higher than its prior forecast to 2030, and it points to a favorable outlook for Applied’s business and our shares.

That said, AMAT shares have been on a bit of a tear since we started the Pro Portfolio’s position back in late March, and an even bigger one dating back to November of last year. That suggests the company will need to deliver guidance on the upper end of those bands or better, especially after folks like RBC and Citi boosted their price targets earlier this week to $500-$520 from $420-$430.

If we see a negative post-earnings reaction in the shares, we may be interested in adding to our position, subject to the size of that pullback. Chart watchers will note support at near $379 and again near $350.

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At the time of publication, TheStreet Pro Portfolio was long AMAT shares.