Applied Materials serves up a better than expected 2017 Analyst Day

Applied Materials serves up a better than expected 2017 Analyst Day

Yesterday was a big day, and while you may be thinking about the headlines surrounding the revealed GOP tax plan I’m talking about the very upbeat 2017 Analyst Day held by Disruptive Technology company Applied Materials (AMAT). I expected the company to deliver a bullish take on the health of its end markets, but candidly it was even stronger than expected as the company offered not one, not two, but three-year guidance. That’s right it offered its take on 2020 with earnings of $5.08 per share and announced a new $3 billion share repurchase program.

As we are fond of saying here at Tematica, context is key and that 2020 EPS of $5.08 compares to consensus EPS of $3.20 this year and $3.60 next year. Continuing the context, adding the new $3 billion buyback program to the mix brings the total outstanding buyback to roughly $4 billion. At current share price levels, ls the company could buy up to 81.6 million shares, roughly 7.5% of the total outstanding share count. As one might suspect, the underlying strength of this outlook lies in robust chip demand not only due to smartphones but also ramping Internet of Things applications, big data and artificial intelligence (A.I.) that are part of our Connected Society and Disruptive Technology investing themes.

Inside its multi-year forecast, Applied is calling for a compound annual growth rate of 23% for its Display business. In our view confirms the growing adoption of organic light emitting diode displays (OLEDs) and reinforces our bullish stance on Universal Display (OLED) shares. When we first introduced Universal Display shares, we compared it to the transition to light emitting diodes that took several years and also started in mobile phones but expanded into other applications as industry manufacturing capacity rose and prices declined. We continue to see the same evolution happening with OLEDs, and that should drive demand for Universal’s chemicals as well as expand its high-margin intellectual property business.

In sum, what was expected to be a positive development for both Applied Materials and Universal Display was even stronger than expected. On the back of this more than favorable outlook, we are boosting our price target on AMAT shares to $60 from $55. For now, our price target on OLED shares remains $175.

  • On the back of this more than favorable outlook, we are boosting our price target on Applied Materials (AMAT) shares to $60 from $55.
  • Our price target on Universal Display (OLED) shares was recently raised to $175 from $135, and we remain quite comfortable with that revision.
Tencent scales thematic investments in payments, AI and cloud

Tencent scales thematic investments in payments, AI and cloud

Our Content is King theme isn’t the only one getting a lot of attention this week as more companies look to invest not only in payments, which we see as Cashless Consumption but also artificial intelligence, a slice of our Disruptive Technologies theme. As we look at these moves, we are reminded of the global nature of our investing themes. This means that Amazon (AMZN), MasterCard (MA), Visa (V), Facebook (FB), Alphabet (GOOGL), Apple (AAPL), PayPal (PYPL) and the like need to be aware of moves made by Tencent (TCHEY), Alibaba (BABA) and other players outside the US.

Tencent, the Chinese mobile games and social media company, is gearing up to increase its investments in online payments, cloud services and artificial intelligence.Still, with competition on the rise in the digital payments market, the investments are necessary. “We think there is still a lot of growth potential from Tencent’s cloud and payment business,” BOCOM International Analyst Connie Gu said in the Reuters report.

China’s Tencent isn’t only investing in artificial intelligence, payments and cloud services. Earlier this month, it showcased how it is also investing in other areas. Essential Products, the smartphone company that was started by Andy Rubin — the creator of the Android mobile operating system — raised $300 million in venture funding from a cadre of investors, including Tencent. According to a news report in The Wall Street Journal, the company announced the list of investors betting it can take on Apple and Samsung Electronics in the smartphone market, reported the paper.

Source: Tencent Increases Investments In AI, Payments | PYMNTS.com