This article was originally published on Kiplinger – https://www.kiplinger.com/
Buyback commitment: $6 billion
While the Gold Rush of 1849 panned out to be a windfall for a few lucky prospectors, most of the miners who headed west seeking their fortune found nothing but disappointment. The only reliable way of making any money during the mania was supplying pickaxes and shovels to the people who didn’t bring one.
That’s how Applied Materials (AMAT, $58.03) makes its money, in a sense. Rather than competing directly in a crowded semiconductor arena, it supplies equipment and materials used in the creation and manufacture of computer chips and cutting-edge display screens. That has enabled AMAT to ride the evolution of computer technology.
The proof is in the last quarter’s results. Sales grew 28% year-over-year, prodding a 58% improvement in per-share profits. CEO Gary Dickerson believes his company will experience more of the same. Also, not only did Applied Materials double its quarterly dividend, but the board of directors approved $6 billion worth of stock repurchases. For perspective, Applied Materials only sports a market cap of $61 billion.
The growth trajectory and buyback were enough for Credit Suisse, which already rates AMAT at “Outperform,” (the equivalent of “Buy”) to raise its target price on the stock from $72 to $74. Credit Suisse analyst Farhan Ahmad wasn’t surprised to hear the buyback news but did write that it materialized sooner than expected.