Applied Materials (AMAT), a semiconductor/solar play, is up over 10% in the weeks leading up to its July Quarter earnings (Tuesday, August 12th, after close). FBR doesn’t see any catalysts that will drive the stock higher near term:
…we expect an in-line quarter, with booking declining 25% QOQ, at the low end of the guidance range of -15% to -25%. We also expect downside risk to the October-quarter consensus estimates, though we do not expect AMAT to include any TF [thin-film] solar revenue in the guidance, given uncertainties associated with the timing of qualifications. October-quarter bookings guidance is expected to be down ~5% QOQ, driven down by display/silicon, offset by (crystaline) solar.
Long term, FBR is betting on AMAT’s solar business. The firm sees AMAT challenging (and beating) First Solar (FSLR) on its core strenth: price.
Although competitors continue to make noise about the “imperfection” of AMAT’s TF solar technology, we believe AMAT continues to hit its milestones, though there have been several quarters of delays along the way. Thus, we still see a tremendous market opportunity in TF solar, as AMAT is among a few that are working on a “technology” that could make the total cost of module deployment/energy generation at or below grid prices by CY10, theoretically before even industry cost leaders such as FSLR!
FBR reiterates OUTPERFORM on Applied Materials (AMAT), target $25.
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