Applied Materials (NASDAQ: AMAT) reported Q2 numbers earlier in the week. They were dismal, to say the least. According to Jon Ogg's Closing Bell on Wednesday, the semiconductor business saw its top line reduced by 50%, and the adjusted loss came to 10 cents per share. Yes, yes, that met expectations. So what? The article also mentioned that the solar operation wasn't doing so hot.
Looking through the actual earnings release, I don't see a lot of things that would make a shareholder happy. Backlog was down. Applied Materials had to use cash to keep things going over the last six months (obviously investors would rather see cash generated from operations). And CEO Mike Splinter described the current climate as very tough in terms of customer demand.
But what about the rally? Even though markets were down yesterday, is Applied Materials nevertheless a buy based on the notion that all the bad news has been discounted in?
The 52-week low is currently pegged at $7.80. Well, as of the close of trading on Wednesday, Applied Materials was priced at $10.99. Also, Applied Materials is in the green on the year-to-date frame. This has been the story for a lot of stocks.
I cannot, however, get myself to consider this tech company for a trade. And I would not enter a long-term position, either. The numbers just don't give me any confidence.
Yes, Applied Materials will probably rise again at some point. Again, though, if you buy now, you're basically buying on speculation that the rally we've seen in the markets is for real and that a new bull is running things on Wall Street. Maybe that's the case. But I think there might be better ways to play tech if you honestly believe such a thesis. There's Microsoft (NASDAQ: MSFT). There's Apple (NASDAQ: AAPL). There's Hewlett-Packard (NYSE: HPQ).
I'm not saying I'd buy any of the above at the moment. I'm just saying there are probably better alternatives out there than Applied Materials. For me, looking at other companies would be the way to go because of the fundamentals involved. You can always check in with Applied Materials at a later date.
Disclosure: I don't own any company mentioned; positions can change without notice.
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