Applied Materials (AMAT) Is Looking Chipper Today Despite The Chip Equipment Giant Lowering Guidance
1:21 pm Thursday, October 13th, 2022
Applied Materials (AMAT) is looking chipper today despite the semiconductor equipment giant lowering guidance pretty substantially for Q4 (Oct) for both revenue and adjusted EPS.
It was not a demand issue, but rather it was the US government’s recent decision to implement new export regulations for US semiconductor technology sold in China. This includes wafer fabrication equipment, which is AMAT’s bread-and-butter, as well as related parts and services. AMAT estimates that the new regulations will reduce its Q4 sales by $250-550 mln.
As such, AMAT lowered its Q4 revenue outlook to $6.15-6.65 bln from $6.25-7.05 bln and adjusted EPS to $1.54-1.78 from $1.82-2.18 prior guidance. To make matters worse, it will not just be a one quarter hit. AMAT expects the new regulations will impact sales in Q1 (Jan) by a similar amount as in Q4.
The stock is lower, but not by as much as you might expect given the large guidance cut. We think a couple of things are happening. First, a guidance cut from AMAT and other chip equipment names was pretty much expected when the new regulations were published on Friday. The stock had already fallen 14% since last Thursday’s closing price in anticipation of what this would mean.
Overall, the guidance reduction was quite substantial and clearly a negative for AMAT, but not entirely unexpected. Unfortunately, it sounds like it will have a similar impact on JanQ. And we would not be surprised to see it extend beyond that. The one silver lining perhaps is some improvement on the supply chain front. Finally, we think it is likely we will see more chip equipment names guide lower soon.
