Key factors to watch when Applied Materials (AMAT) reports Q1 earnings

Applied Materials Inc. (NASDAQ: AMAT) is set to report first-quarter 2020 earnings results on Wednesday after the market closes. The results will be benefited by the customer spending on capital equipment and services to support key technology transitions or to increase production volume in response to the worldwide demand for semiconductors and displays.

The demand for advanced electronic products continues to dominate the semiconductor industry. The industry has created new opportunities backed by the growth of data and emerging end-market drivers that include artificial intelligence, augmented and virtual reality, the Internet of Things (IoT), and smart or autonomous vehicles.

The top line will be primarily driven by customer investments in semiconductor and display manufacturing equipment and services due to new technology transitions. However, the bottom line will be hurt by the company’s ongoing investments in product development initiatives, which remained consistent with its growth strategy.

The market experts believe that the implementation of artificial intelligence, IoT, and big data could be beneficial for the company at least for the next couple of years. Also, the company could experience strong semiconductors demand for memory, storage, and networking with increased demand for equipment and services.

Analysts expect the company’s earnings to jump by 13.60% to $0.92 per share and revenue will increase by 10% to $4.11 billion for the first quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $69.26.

Read: Activision Blizzard Q4 earnings review

For the fourth quarter, Applied Materials posted an 8% decline in earnings due to higher costs and expenses. The company experienced flat revenue backed by a healthy uptick in demand for semiconductor equipment. For the first quarter, the company expects net sales to be about $4.10 billion, plus or minus $150 million, and adjusted earnings in the range of $0.87-0.95 per share.

The shares ended Friday’s regular session down 2.34% at $61.71. The stock, which has risen over 12% in the past three months and over 58% in the past year, exceeded the S&P500 52-week change of 23.64%. The stock remained above the 50-day and 200-day moving average of $61.56 and $54.61, respectively.

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