Friday Four Play: The “His Applied Materials” Edition
Great Ones, it’s no secret that the tech sector is in shambles right now. A shadow of its former market-domineering self. Even semiconductor stocks — the linchpins of the tech sector — are taking a massive beating.
But as Douglas Adams once wrote: “Don’t Panic!”
After all, you’re a Great One. You are one hoopy frood who always knows where your towel is! You don’t panic. You hold those crucial semiconductor stocks because you know they’re coming back strong.
Case in point: Great Stuff Picks holding Applied Materials (Nasdaq: AMAT).
If you bought in way back in July 2020 when I recommended the stock, you’re sitting on a gain of nearly 70%.
And yes, you are probably lamenting not taking profits back when the gains were in the triple digits … but you also know that AMAT is headed back to those lofty heights and then some.
I mean, I know this … especially after Applied Materials let loose with a massively positive quarterly financial report. Let’s take a quick look at the numbers:
- Earnings per share: $1.94 versus $1.79 expected.
- Revenue: $6.52 billion versus $6.3 billion expected.
A solid performance, to be sure. But what about guidance? What about the future?!
Well, Applied Materials has that covered as well. The company said it expects Q4 earnings to arrive in a range between $1.82 per share and $2.18 per share, with revenue rising to $6.65 billion. Both figures easily bested Wall Street’s expectations.
Now, you’d think with numbers like that, AMAT stock would surge. But nope. Uh-uh. AMAT dropped more than 3% today. Why? Because CEO Gary Dickerson said the quiet part out loud:
Never mind the confidence. Never mind the strong Q4 guidance. Never mind that Applied Materials is running smoothly, growing revenue, funding R&D programs and preparing for global economic headwinds.
The mere fact that Applied Materials acknowledged the reality of “macroeconomic headwinds” threw Wall Street for a loop. I guess realism is a bit too much for investors drunk on easy money to handle right now.
Suffice it to say that Applied Materials will be just fine. The company makes specialized equipment to manufacture semiconductors, after all. And semiconductors are in literally everything. Long-term demand isn’t going anywhere.
So my advice to you, Great Ones, is that if you haven’t already added AMAT stock to your portfolio — even though it’s been a Great Stuff Pick for a while — do yourself a favor and buy AMAT now.
After all, a stock falling in price after displaying solid corporate leadership with strong earnings and revenue growth is exactly the kinda investment you want to jump on before Wall Street comes to its senses.
But if you’re already in on AMAT, fret not — hey, hey, I said no fretting!
There is … another.
A tiny Silicon Valley company is using artificial intelligence to unleash the largest untapped energy source in the world.
Why are they always so tiny? Drink more milk, little tech companies!
I’m not talking about oil, gas, wind, solar, hydro, nuclear … or anything you’ve likely heard about before. Yet this breakthrough is set to help launch an era of cheap, abundant electricity the likes of which the world has never seen.
And now for something completely different … it’s time for Friday Four Play!
No. 1: Deere In The Headlights
(Spoiler alert: It doesn’t end well for the Deere.)
Remember a few weeks back when we talked about Caterpillar’s (NYSE: CAT) somewhat mixed equipment sales, and everyone was like: “Oh noes, people are like, never going to build anything again!” And CAT stock fell 4%?
Yeah, imagine how Deere (NYSE: DE) felt entering the earnings confessional to report on its equipment sales.
From cats to deer, really? Spit it out, Jack Hanna.
The maker of everything from tractors to forestry machinery to weed whackers, John Deere just reported disappointing earnings … and worse … disappointing guidance! Oh, the Deere-manity.
Revenue over at Deere totaled $13 billion and met expectations, but per-share earnings of $6.16 missed estimates for $6.65.
Going forward doesn’t look too much brighter either: Deere specifically mentioned that it expects slower growth for construction equipment sales … and I guess that’s where Wall Street stopped reading.
DE stock was already down 6% before investors realized: “Hey, wait a sec. Slower growth is still growth. What’s the deal?” And as it turns out, Deere’s equipment sales are still expected to rise about 20% year over year, thanks to the consumer market exposure that CAT doesn’t have.
Of course, you need only mention “slower growth” and “higher costs,” and you’re done-zo as far as analysts are concerned.
No. 2: Dividend Depot
Name a better duo than share buybacks and dividend hikes? I’ll wait … just like I always wait for someone to come to the paint counter at Home Depot (NYSE: HD).
What’s a blue chip to do after posting brilliant, expectations-destroying earnings? Why, you go to Disneyland … or buy back some shares. Whichever floats your goat.
If you’re Home Depot, you’re buying back $15 billion in HD shares. That’s right: $15. Billion.
I mean, c’mon: We all know that share buybacks are what a company does when management has no better way to spend money. (There are only so many “company retreats” to Hawaii you can take, after all.)
Home Depot is also keeping its $1.90-per-share dividend in place — because it can.
Ironically, all these investor-pleasing moves didn’t quite sway the Street today however, sending Home Depot stock down about 1%.
No. 3: Blue Chips Gonna Blue Chip
Never one to be left out of the party, General Motors (NYSE: GM) showed up in today’s headlines to report its own share buyback program — to the tune of $5 billion. Sure, that’s only a third as much dough as Home Depot’s buyback program (and nowhere near as impressive), but we’re comparing apples, oranges and DIY stores here.
See, GM is trying so hard to prove to investors that it’s past its pandemic precipice — that it’s a whole new EV-making machine, albeit with a few blue-chip tendencies here and there.
The share buybacks are one thing, but dividends? Oh, now you’re speaking investors’ value-seeking language.
GM is officially reinstating the dividend that it dropped in April 2020 … literally ages ago. However, GM investors are only getting about 24% of that original dividend — $0.09 per share compared to the previous $0.38 per share.
Unlike HD, GM shot up 1% on the buybacks-plus-dividend news.
But which blue chips are safe? Which blue chips are … less safe? And which Dow stalwarts are gonna be next to fade into obscurity? Ian King has the details here.
No. 4: One More Retailer For The Road?
Ohhh, why not!
One retailer after another has reported earnings this week — to varying degrees of success, mind you — so we better leave off with the best of the bunch.
Which would be … what?
Foot Locker (NYSE: FL) … yeah, I’m as surprised as you are. Foot Locker’s earnings came in at a healthy $1.10 per share for the quarter, much higher than the $0.80 analysts expected, while revenue matched estimates.
A retailer that isn’t failing? Is it changing its name to “Food Locker?”
Funny, but apparently food, gasoline and shoes are all people are buying right now. It’s all very fairytale-esque.
There once was an investor who lived in a shoe?
But wait, it gets better!
While CFO Andrew Page said full-year sales figures would be on the lower side of Foot Locker’s guidance … he didn’t outright revoke said guidance. And compared to literally everyone that is lowering their revenue expectations, that’s commendable.
So is Foot Locker really doing that well? Did analysts just have low expectations?
Meh … Wall Street wasn’t all that bothered by the fine details: There’s bigger news over at Foot Locker today. Again, for a stock we’ve barely ever mentioned before … I’m as surprised as you are.
CEO Richard Johnson is retiring, to be replaced by Ulta Beauty’s former CEO, Mary Dillon. I don’t know about you, but in my mental strip-mall hierarchy … Ulta is way ahead of ol’ Foot Locker, and I can see why investors have high hopes with Mary Dillon coming on.
FL stock ran up 21% today on the report.
The Perfect Stocks For Inflation & Rate Hikes
Federal Reserve rate hikes. Soaring inflation. Plunging markets.
Just wait until they release the lions and tigers…
Most investors are hiding under their beds these days. But not Charles Mizrahi … because he knows the perfect stocks for beating rate hikes and inflation.
And that’s a wrap, Great Ones! What do you think of today’s insanity? Got any weekend plans? Trades in your sights? Rants and tirades you gotta get off your chest?
Let me hear it all! (Though be advised: If you go off detailing all your illegal misadventures, we’re kinda maybe probably supposed to report it. Allegedly. I think.)
Let know what you think of today’s insanity and write to us at GreatStuffToday@BanyanHill.com.
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Editor, Great Stuff