Applied Materials Inc (NASDAQ:AMAT, ETR:AP2) shares fell 13.2% on Friday after the semiconductor equipment maker issued weaker-than-expected guidance for the fourth quarter.
The company expects revenue around $6.7 billion and EPS near $2.11, both below analysts’ forecasts of $7.32 billion and $2.38.
Despite the soft outlook, Applied beat third-quarter estimates. Adjusted EPS rose 17% year-on-year to $2.48, topping the $2.36 consensus, while revenue increased 8% to $7.30 billion, above the $7.22 billion forecast.
CEO Gary Dickerson told shareholders that the company is on track for its sixth straight year of revenue growth.
By segment, Semiconductor Systems revenue climbed 10% to $5.43 billion, Applied Global Services rose 1% to $1.60 billion, and Display & Adjacent Markets grew 5% to $263 million. Adjusted gross margin expanded to 48.9%.
Bank of America downgraded Applied to “Neutral.”
“While AMAT is a high quality supplier, the company's higher exposure to (over-supplied) mature node…and certain leading-edge customers (Intel Corp (NASDAQ:INTC, ETR:INL) is impacting them more this part of the cycle,” analysts wrote.
“Per AMAT, the uncertainty could persist, making it tougher for the stock to outperform despite reasonable valuation.”