Up 50% This Year, Will Applied Materials Stock Continue To Outperform?

Applied Materials
AMAT
stock has gained by about 52% year-to-date and also remains up by roughly 7% over the past month, outperforming the broader Nasdaq-100 which remains up 37% this year. There are multiple factors driving the outperformance. Firstly, Applied posted a better-than-expected set of results for the quarter ending July 2023. Although revenue declined by 1.4% year-over-year amid weaker uptake from memory makers, this is being largely offset by higher demand from the Internet of Things, communication, automotive, power, and sensors space. Moreover, the company’s guidance for Q4 FY’23 was also better than expected, with revenue projected at $6.51 billion at the midpoint and adjusted earnings projected at between $1.82 to $2.18 per share. Applied also appears to be gaining market share in the DRAM fabrication space. Although the memory market is currently seeing a lull, these market share gains could help Applied post stronger revenues through the coming upcycle in memory prices.

Interestingly, AMAT stock had a Sharpe Ratio of 0.7 since early 2017, higher than 0.6 for the S&P 500 Index over the same period. Still, it falls short of the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.