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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (32124)	8/19/1999 1:37:00 PM
From: A. Edwards	Respond to of 70976

Prudential Securities Research Notes on AMAT after 3QFY99: John W. Pitzer August 18, 1999 3QFY99 was a mixed message and probably places pressure on the stock. Although AMAT significantly beat street EPS estimates, lack of upside to bookings and conservative (albeit sequential) guidance for 4QFY99 bookings will probably place the stock under pressure. We believe that the semiconductor industry is currently attempting to digest and to improve yields at 0.18 mm microns - which could lead to a slowing of growth in bookings over the next quarter or two. A slowing of sequential growth rates for new bookings will probably place pressure on the stock. But we would view this as a buying opportunity. However, fundamentals in the semiconductor industry continue to improve. Logic and foundry demand continue to be strong and more recently, a surge in DRAM pricing has placed manufacturers in a near-term profit mode. In addition, we believe that inventory levels are low and sell through continues to be strong heading into a seasonally strong period for semiconductor devices. We continue to believe that the best metrics to monitor the health of Applied Materials business are the relevant trends in the semiconductor industry, which continue to be positive. Despite bookings, 3QFY99 helped to solidify the investment thesis. 3QFY99 helped to re-enforce our belief that Applied Materials is gaining share and should exit the current downturn more profitable - allowing for further expansion in margins and leverage to EPS. Pressure on the stock today should be viewed as a buying opportunity - we believe the downside risk to the stock is 20-22 times our calendar 2000 EPS estimate of $2.96 while upside once meaningful sequential bookings growth resumes is 28-32 times $2.96. The risk/reward continues to justify having AMAT under accumulation.