Needham More Cautious than Applied Materials' (AMAT) Management

Applied Materials (NASDAQ: AMAT) reported a largely inline F4Q15 (Oct) but provided better than expected F1Q15 (Jan) earnings outlook on good cost control. Management's outlook calls for CY16 WFE to be flat to CY15 based on a recovery in CY2H16. However, Needham & Company analyst Ed Mok holds a more cautious view and sees "uncertainty of the timing of the 10nm foundry ramp-up and magnitude of 3D NAND investments resulting in a down year". He sees AMAT benefiting from several technology inflections and some market share wins, resulting in the Silicon and Display businesses outperforming the industries. However, he expects declining earnings on limited margins and is concerned over competition from LRCX.

Revenue of $2.37B was below Street's $2.40B, but EPS of $0.29 met consensus. Bookings of $2.42B declined 16% QoQ, mostly due to a 28% QoQ drop in Silicon partially offset by growth in AGS. gross margin of 42.2% was down 170bps QoQ, slightly better than guidance of down 2 pts. Revenue guidance of down 2-9% QoQ put the midpoint at $2.24B vs. Street's $2.25B. EPS of $0.23-$0.27 is above Street's $0.24 on stable margins.

No change to Hold rating.

For an analyst ratings summary and ratings history on Applied Materials click here. For more ratings news on Applied Materials click here.

Shares of Applied Materials closed at $16.53 yesterday.

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