Why Has Applied Materials' Stock Tripled Over The Last 4 Years?

Applied Materials’ (NASDAQ: AMAT) stock has risen almost 3x over the past 4 years from $16.10 in August 2015 to $47.50 in August 2019. This rise was primarily driven by a sharp increase in revenue and net income margin, along with a drop in shares outstanding, which has pushed up earnings per share. We expect this growth to slow down going into late 2019, with a decrease in display and memory unit demand.

View our interactive dashboard analysis Applied Materials: Why did the stock grow 3x in 4 years?

We break down the change in Applied Materials’ stock into 4 factors: Stock Price = (Revenue x Margins / No. of Shares) x P/E Multiple

A] Growth in Applied Materials’ Revenue has been driven by huge demand growth and increasing memory prices

  • Applied Materials’ revenue has grown 78.6% from 2015-2018, but we expect numbers to weaken in 2019, on the back of trade tensions and falling demand.
  • Revenue from their semiconductor equipment division has been a key driver, owing to higher spending by semiconductor manufacturers trying to capitalize on the rise in memory prices.
  • Revenue from their display division has also seen consistent growth on the back of growing demand for OLED displays and flat panels used in large format TVs.
  • However, we estimate a drop in revenue for 2019, amidst ongoing trade tensions, along with falling memory prices and weakening demand in the TV space.


B] Net Income Margin has grown from 14.3% in 2015 to 19.2% in 2018, and we expect it to further grow to 21.8% in 2019

  • The sharp increase in net income margins, is largely due to improving profit margins from the company’s display and semiconductor divisions.
  • We expect net income margins to grow to 21.8% for 2019, even with decreasing revenue, as the company is expected to cut down on the high R&D and marketing costs from the previous 2 years, on the back of slowing demand.

C] How has Applied Material’s P/E multiple compared to that of its peers?

  • Applied Materials’ P/E multiple momentarily rose to 21.3 in 2016, over a strong demand outlook at the time, both in the memory chip and display divisions.
  • The P/E multiple has fallen back down to the 14.5-15.5 range, on the back of trade tensions and lower demand expected to affect business.
  • Lam Research has somewhat followed a similar trend, whereas KLA Tencor’s earnings multiple has surged over 2018-2019.


What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics

US Markets Investing

Latest Stocks Videos


    Trefis is an interactive financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. Whereas most finance sites simply give you the facts about where a stock has been and what a company has done in the past, Trefis focuses entirely on the future.

    Learn More