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AMAT - Applied MaterialsA Semiconductor Company Becomes a Solar Energy Company
Applied could have a 30 percent market share as a "picks and shovels" player in the alternative solar energy market.
More Charts for AMAT Applied Materials is the recognized semiconductor capital equipment industry leader. Applied's tools are used in making wafers containing integrated circuits (chips) used in everything from the iPhone to Boeing jetliners. Applied is also a leader in capital equipment used to make flat panel displays in sizes ranging from the tiny screens on cell phones and digital cameras up to the very large high definition television (HDTV) screens. Applied Material's latest growth market is alternative energy where Applied's equipment is being used to build solar panels in very large solar arrays. Credit Suisse semiconductor capital equipment analyst Satya Kumar says that Applied Materials has the "makings of a billion-dollar [solar] business." Kumar projects that Applied could do $1.5 billion in solar related revenue by 2010, assuming Applied captures about 30% of the market. Currently Applied makes about $400 million a year in the solar business and has a 2010 target of only $500 million, only a third of Kumar's estimate. Applied Materials has worked hard to diversify its business. Applied's orders once followed the ups and downs of the personal computer business that depends heavily on integrated circuits from Applied's big customers such as Intel for microprocessors and Micron Technology for memory. The flat panel market for HDTVs, cameras and cell phones has helped Applied diversify into the consumer market. Having a third major business should help Applied further reduce its stock price volatility, a good thing for most investors. Applied currently trades at about 16 times 2008 earnings estimates. With a five-year estimated growth rate of 16.7%, AMAT has a forward PEG ratio of 1.0. If higher earnings from solar energy materialize as Kumar projects, then AMAT would look like a bargain basement stock when compared to the others in the alternative energy space currently favored by investors. For sure, Applied is a good "picks and shovels play" for the alternative energy market. Kirk's AMAT Disclaimer: I own AMAT at the time I am writing this article in my personal and my newsletter Explore Portfolios. I make no promises to tell you here if I sell it ahead of time in either portfolio. Buy at your own risk and consult with your own investment advisor before doing so. Kirk Lindstrom: Disclaimers: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk.
The copyright of the article AMAT - Applied Materials in Investment is owned by Kirk Lindstrom. Permission to republish AMAT - Applied Materials in print or online must be granted by the author in writing.
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