Applied Materials, Inc. (NASDAQ:AMAT), a provider of manufacturing equipment, services and software, had a weak session yesterday and ended the day with a loss of 2.97%. A seen in the last few days, the volume spiked on a down day once again and at 33 million, it was nearly double the daily average of 18 million. That kind of volume pattern is a distinct sign of the distribution process and can’t be soothing for the bulls. The stock has lost about 15% in the last 7 weeks, after retesting the 52 week high at $25.64.
During the current year, the slower Wafer Fabrication Equipment (WFE) expenses have hurt the Applied Materials, Inc. (NASDAQ:AMAT) stock price and the industrial capital expenditure trends on technological inflection points can hurt it more in the next few years.
On the other hand, the analysts of Deutsche Bank have reiterated their “buy” rating with a price objective of $30. The prospects of the merger between Applied Materials, Inc. (NASDAQ:AMAT) and Tokyo Electron Ltd (TYO:8035) look very bright to the bank as it may drive significant earnings leverage and unlock good value for the shareholders. The revised-base case of the bank assumes that when cost synergies are fully included, then Applied Materials, Inc. (NASDAQ:AMAT) can generate earnings of more than $2.40 per share. The bank estimates an EPS of $1.92 for calendar year 2015 (CY16) and $2.23 for CY17.
The technical picture doesn’t encourage much as the weakness of the last few weeks looks significant enough. The stock made a Double Top at the $25.60-70 levels which was also coincident with the long term swing top made in 2004, as shown on the chart attached. A corrective bounce to $23 or even $24 levels can’t be ruled out but in the next few months, a further decline to $20.50 or $18.50 looks very likely.
