Applied Materials Finishes Fiscal 2022 on a High Note; Memory and China Headwinds Loom in 2023

Wide-moat Applied Materials reported fiscal fourth-quarter revenue above the midpoint of the firm’s updated guidance provided on Oct. 12 due to the latest export restrictions on U.S. semiconductor equipment to China. Specifically, management had lowered its revenue outlook to $6.4 billion (from $6.65 billion previously), but ultimately overestimated the impact of the restrictions while enjoying improved supply conditions that enabled stronger shipments. We maintain our view that the wafer fab equipment market will be down 22% in 2023 primarily due to weaker memory spending. Our fair value remains $110 per share for Applied and we view shares as fairly valued following the recent run-up in the stock (up 39% over the past month).