This company just agreed to purchase its third-largest rival, Tokyo Electron, and Glenview Capital just bought into this stock with a 1.48% position.
Applied Materials (AMAT)
from Cabot Top Ten Trader
Applied Materials’ (AMAT) hardware dominates the chip-making process across the globe, with equipment specializing in layering film on wafers, etching circuits, and semiconductor metrology and inspection.
Currently, the buzz surrounding Applied Materials is centered on its pending $2.6 buyout of fellow semiconductor equipment maker, Tokyo Electron. The merger still has several regulatory hurdles to clear, but analysts remain confident that the deal is a go. In fact, analysts at Jefferies recently initiated coverage of Applied Materials with a “buy” rating, citing the potential for increased pricing power and “scale benefits.” Revenue growth is averaging 16% and earnings growth, 138% year-over-year, during the past four quarters.
The Tokyo Electron acquisition is likely to help push Applied Materials’ earnings growth to 81% this year, with an additional 25% upside seen in 2015.
Since January 2013, shares have enjoyed a steady stairstep pattern along support at their 10-week and 25-week moving averages. Volume spiked in September last year, when Applied announced its acquisition plans for Tokyo Electron. Volume once again picked up in early 2014 after the boards of both companies approved the deal. Following a recent test of support near its 25-week moving average, AMAT eclipsed 20 and is now trading at multi-year highs. We recommend buying as AMAT consolidates its recent gains into support in the 20 region.
Suggested Buy Range 20-22
Suggested Loss Limit 18-19
(Cabot’s buy range is valid for two weeks.)
Michael Cintolo, Cabot Top Ten Trader, www.cabot.net, 978-745-5532, June 9, 2014