Applied Materials Earnings Preview (May 15, 2007)

Applied Materials Inc. (AMAT-NASDAQ) reports its Q2 earnings after today’s close and First Call estimates are $0.28 EPS and $2.35 billion in revenues.  As far as what to expect for Q3, the current estimates are $0.30 EPS and $2.43 Billion in revenues.

What is most interesting is that AMAT shares have actually climbed up to over $20.00 again for the first time since early 2006.  The highs on various rallies in late 2003 and early 2004 were just north of $25, then $24, and then $23; so from current levels the stock looks like it could have a 10% upside from here before it starts meeting some stronger resistance level if it gets over that $21.00 hurdle.

Based on very early options trading, it appears that options traders are braced for a move of $0.40 to $0.50 in either direction.  This may be a tad off since shares have been coming in after the open.

Applied Materials has a new area that it can shift its focus to other than Cap-Ex spending out of chip-makers.  It has been growing its solar operations now that it acquired the Applied Films and this is still being under-covered by the media and by those that follow the stock.  It is very likely that this has at least helped the push that helped drive the stock from around $15.00 last summer up to a $17.00 to $19.00 range and then back over $20.00.  As this area grows and becomes more main stream, Applied Materials has the opportunity to capitalize.

The company probably should focus more on solar, but its new 45 nanometer transistor testing that was announced this morning will probably rule the conference call.  Other stocks to watch based on AMAT: KLAC, NVLS, TER, KLIC, LRCX.

Jon C. Ogg
May 15, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.