Should You Invest in Applied Materials?

PHOTO CREDIT: Applied Materials

OVERVIEW

Applied Materials Incorporation is a company based in the United States. The company designs, manufactures, and sells manufacturing equipment for semiconductors and displays around the world. The company also offers integration services for these products as well. The company was founded in 1967.

Why You Should?

  1. Applied Materials is a great growth play in an investor’s portfolio. The company continues to see long-term demand rising for its products as the demand for semiconductors and displays continues to rise as the world modernizes. This will benefit the company and help it drive future sales. This will also benefit investors in the company.
  2. The Biden administration will benefit the company. Biden wants to invest in the nation’s semiconductor manufacturing process, something that will increase the company’s domestic sales. Biden also wants to sign trade deals with our allies, something that will help the company sell more of its machines and services internationally.
  3. The current semiconductor shortage comes to show the opportunity that Applied Materials has. The company is currently producing machines to manufacture chips and other semiconductor products in order to help manufacturers (like TSMC) capitalize on high demand. This short to mid-term shortage will benefit the company sells more products.
  4. The manufacturing business model will also benefit investors gain exposure in the semiconductor market without having to own a chip company like Nvidia. Applied Materials manufactures machines and offers services that are used by manufacturers (like TSMC) to fulfill orders from Nvidia, Apple, AMD, and other chip designers. This limits risk for Applied Materials.
  5. The company has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company grow its business and sell improved machines and services around the world. This has also benefited investors in the company. In the financial year of 2020, the company reported revenues of around 17.2 billion and profits of around 3.62 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 14.61 billion and profits of around 2.71 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. The company faces tough competition in the semiconductor industry. Some of these companies include Lam Research, Qualcomm, ASML, and many others. This competition might hurt the company and its investors in the future.
  2. The COVID-19 pandemic has negatively impacted the company. Supply chain issues, inflation, as well as other issues caused by the pandemic, have hurt the company’s results and operations over the past year. This will continue to negatively impact the company and its investors in the short to mid-term.

MY OPINION

I think that Applied Materials is a good long-term investment due to its position as a good growth play, the positive impacts from the Biden administration, the semiconductor shortage, its critical position in the chip manufacturing process, as well as rising revenues and profits. However, tough competition and negative impacts from the pandemic might hurt the company and its investors.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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