FBR Capital Adjusts price Target & Estimates on Applied Materials (AMAT); Comments on Upcoming Quarterly Earnings

November 10, 2009 8:52 AM EST

FBR Capital raises price target on Applied Materials (Nasdaq: AMAT) from $11 to $14.

FBR analyst says, "When AMAT reports October quarter results on Wednesday, after the close, we expect the company to report to the high end of its revenue/EPS guidance range, with bookings expected to have improved by 25%-plus QOQ, driven by the silicon (60% of total) and display (9% of total) related bookings growth. We expect a 25%-plus decline in energy and environmental solution-related bookings (EES, which is comprised of si- and TF-related as well as such emerging areas as LED), driven mostly by lack of any bookings for its TF-related equipment solution. What may be a positive catalyst for the stock is our expectation of a 10%-15% head-count reduction, which we expect to materially lower the company's break-even point. To that end, we are increasing our estimates into the report. Our FY09 pro forma/GAAP EPS estimates have changed from ($0.06)/($0.30) to ($0.05)/($0.29), while our FY10 estimates have changed from $0.39/$0.30 to $0.64/$0.55. We are also using this opportunity to introduce our FY11 pro forma/GAAP EPS estimates of $0.80/$0.72."

"Critical to the stock: (1) details behind restructuring (such as the actual break-even point), (2) will AMAT start to help TF-related customers in order for AMAT's customers to become more competitive?, and (3) how long will strength in display-related bookings last (which could in effect help offset weak EES-related bookings)?"

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