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I'm indecisive about Applied Materials (NASDAQ: AMAT). The semiconductor company, which also works with solar photovoltaic cells, is starting to look like a good trade to me. However, I still shudder when I examine the numbers. What I've got to keep telling myself, I guess, is that the market is a discounting mechanism, and that now may be the time to act.
According to the press release, which was issued after the market closed on Tuesday, net sales decreased 39% in the third quarter. Adjusted earnings came in at 0 cents per share. That was obviously much less than the 17 cents per share earned one year ago. According to Reuters, which made a further adjustment for equity-based compensation, Applied Materials lost 3 cents per share. The market was expecting a loss of 8 cents per share. The top line beat projections as well.
Traders bid the stock higher by over 2% during the after-hours session.
When I last wrote about Applied Materials, I was bearish. Seriously, although I still feel bearish about the situation, I have to admit that the stock is higher since that article. Maybe I should soften my stance.
Problem is, the statement of cash flows is grim. Cash from operations took a severe drop in the nine-month period, and reported capital expenditures wiped the metric out completely.
No, I'm not a fan of this earnings summary. But I am a realist. Applied Materials has some momentum behind it. If you're careful, you could make some money from trading the stock. I won't personally consider it for a trade right away, but I will be watching it several sessions down the road to see what's up. Like I said last time, if you want to fool around with tech, there's always a bluer chip like Microsoft (NASDAQ: MSFT) to investigate. While you might get more of a pop from something like Applied Materials, there's also more risk. Risk/reward: it's what it's all about.
Disclosure: I don't own any company mentioned; positions can change without notice.
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