Applied Materials shares dip on revenue miss as options markets signal recovery
Despite a 32% drop from year-to-date highs and a revenue shortfall, derivatives data points to a potential rally, while Wall Street remains optimistic on AI-driven growth.
Applied Materials shares declined following the release of its third financial quarter results, where revenue of $9.12 billion missed analyst forecasts of $9.18 billion. The semiconductor equipment maker posted a per-share earnings beat of $3.50, representing a 25% year-on-year increase, but the top-line miss contributed to a sharp sell-off in the stock.
The share price has dropped nearly 32% from its year-to-date high, crashing through its 20-day moving average on Friday. This technical breakdown suggests potential for sustained bearish momentum in the near term, even as the company maintains a dividend yield of 0.42%.
However, options market data indicates a bullish sentiment among derivatives traders. The put-call ratio on contracts expiring in mid-September sits at 0.93, indicating a bullish skew. According to Barchart data, the upper price on these contracts is set at $560, signalling a potential rally of more than 11% over the next four to five weeks.
Management provided a strong outlook for the fourth quarter, guiding for revenue of at least $9.75 billion and adjusted earnings per share of $4.02. This guidance surpasses the $9.6 billion consensus estimate, driven by booming artificial intelligence demand. Advanced packing revenue is projected to increase by over 70% this year, and the company plans to double its manufacturing capacity by 2028 citing extended customer visibility.
Despite the recent volatility, Wall Street analysts maintain a "Strong Buy" consensus rating with a mean price target of nearly $635. The stock is currently trading at a forward price-to-earnings ratio of over 44x, which is higher than peer ASML’s ratio of just over 40x, yet it remains nearly double the price at which it started the year.
