Spotting Winners: Applied Materials (NASDAQ:AMAT) And Semiconductor Manufacturing Stocks In Q2
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Applied Materials (NASDAQ:AMAT) and the rest of the semiconductor manufacturing stocks fared in Q2.
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
The 14 semiconductor manufacturing stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 2.7% below.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
While some semiconductor manufacturing stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.6% since the latest earnings results.
Applied Materials (NASDAQ:AMAT)
Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ:AMAT) is the largest provider of semiconductor wafer fabrication equipment.
Applied Materials reported revenues of $6.78 billion, up 5.5% year on year. This print exceeded analysts’ expectations by 1.6%. Overall, it was a strong quarter for the company with a solid beat of analysts’ EPS estimates and a meaningful improvement in its inventory levels.
“Applied Materials is delivering strong results in 2024 with record revenues in our fiscal third quarter and earnings towards the high end of our guided range,” said Gary Dickerson, President and CEO.
Unsurprisingly, the stock is down 5.2% since reporting and currently trades at $201.06.
Best Q2: Nova (NASDAQ:NVMI)
Headquartered in Israel, Nova (NASDAQ:NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Nova reported revenues of $156.9 million, up 27.8% year on year, outperforming analysts’ expectations by 5.9%. The business had an exceptional quarter with an impressive beat of analysts’ EPS estimates and a significant improvement in its operating margin.
Nova achieved the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 12.2% since reporting. It currently trades at $203.31.
Is now the time to buy Nova? Access our full analysis of the earnings results here, it’s free.
Slowest Q2: Photronics (NASDAQ:PLAB)
Sporting a global footprint of facilities, Photronics (NASDAQ:PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Photronics reported revenues of $211 million, down 5.9% year on year, falling short of analysts’ expectations by 6.2%. It was a softer quarter as it posted underwhelming revenue guidance for the next quarter and a miss of analysts’ EPS estimates.
Photronics delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 6% since the results and currently trades at $25.50.
Read our full analysis of Photronics’s results here.
FormFactor (NASDAQ:FORM)
With customers across the foundry and fabless markets, FormFactor (NASDAQ:FORM) is a US-based provider of test and measurement technologies for semiconductors.
FormFactor reported revenues of $197.5 million, up 26.7% year on year. This print beat analysts’ expectations by 1.3%. It was an exceptional quarter as it also produced a significant improvement in its gross margin and an impressive beat of analysts’ EPS estimates.
The stock is down 14.3% since reporting and currently trades at $45.92.
Read our full, actionable report on FormFactor here, it’s free.
Lam Research (NASDAQ:LRCX)
Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ:LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.
Lam Research reported revenues of $3.87 billion, up 20.7% year on year. This result topped analysts’ expectations by 1%. Overall, it was a strong quarter as it also logged an impressive beat of analysts’ EPS estimates and a meaningful improvement in its operating margin.
The stock is down 11.8% since reporting and currently trades at $81.38.
Read our full, actionable report on Lam Research here, it’s free.
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