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Applied Materials’ 3D ‘Tide’ Won’t Help It Outpace Rivals Lam, KLA

Applied Materials ( AMAT ) could surf the “rising tide” of 3D Nand, but rival Lam Research ( LRCX ) will likely outgrow the No. 2 chip-gear-maker, a Needham analyst said Wednesday ahead of Applied Materials’ Q2 earnings report, due after the close Thursday. In afternoon trading on the stock market today , Applied Materials stock was up 2%, near 20, leading soon-to-merge rivals Lam and KLA-Tencor ( KLAC ), whose shares were up 1.8% and 1%, respectively. The three trail ASML ( ASML ) in terms of market value. ASML stock was up 1% Wednesday afternoon. For its fiscal Q2 ended in late April, Applied Materials is expected to report $2.43 billion in sales and 32 cents earnings per share minus items, flat and up 10%, respectively, on a year-over-year basis. That would come off 4% declines for both metrics in Q1. Three months ago, Applied Materials guided to a 5%-10% sequential jump in sales ($2.37 billion to $2.48 billion) and 30-34 cents EPS ex items. Needham analyst Y. Edwin Mok reiterated his buy rating and 22 price target on Applied Materials stock. Mok and Credit Suisse analyst Farhan Ahmad both expect Applied Materials to report an in-line Q2. But Mok sees potential upside to Applied Materials’ Q3 guidance on strength in 3D Nand flash memory demand. Lam recently guided to 9% quarter-over-quarter shipment growth for Q2. Mok expects Applied Materials to “grow similarly, although likely at a slower pace than Lam.” He sees Applied Materials guiding to 2%-7% sequential growth for Q3 vs. consensus of 22 analysts polled by Thomson Reuters, which models 3% quarter-over-quarter sales growth. Ahmad, on the other hand, expects in-line Q3 guidance. For the second half of the year, display revenue could be guided up 10%-20% vs. last year’s flat quarter, but DRAM (dynamic random-access memory) guidance could disappoint. “DRAM second-half revenues could be ticked down to flat (vs. the prior period),” he wrote in a research report. “Expectations are relatively high. Most investors expect a beat than a miss,” but DRAM has been macroeconomically slogged for several years on slowing PC sales. He kept his outperform rating and 23 price target.

EA Scores Positive Reviews From Investor Day; Stock Gets PT Hike

Video game publisher Electronic Arts ( EA ) on Tuesday laid out its plan to add $1 billion in incremental revenue within the next three to five years. EA earned mostly positive reviews for its presentation at the company’s investor day event, held at its headquarters in Redwood City, Calif. Oppenheimer analyst Andrew Uerkwitz reiterated his outperform rating on EA stock but raised his price target to 88 from 78. EA stock was down 1%, near 74, in early afternoon trading on the stock market today . Electronic Arts shares hit an all-time high of 77.15 on Monday. “We came away more confident in EA’s growth strategy and ability to engage existing and potential customers with new tools,” Uerkwitz said in a research report Wednesday. “We believe secular tailwinds such as the move to digital and mobile will support multiyear margin expansion and profit growth for the company.” EA sees future sales growth coming from action games, shooter games and international expansion. It projects that digital growth, including sales of full-game downloads and extra content spending, will boost profitability. Another area of growth is e-sports. EA says competitive gaming initiatives will drive game sales, plus deliver advertising and sponsorship revenue. The next potential catalyst for EA is the E3 video game conference in mid-June, Piper Jaffray analyst Michael Olson said in a note Wednesday. He maintained his overweight rating on EA stock with a price target of 87. EA’s game lineup for its current fiscal 2017 is more attractive than last year’s slate, Olson said. Upcoming releases include “Mirror’s Edge Catalyst,” due out June 7, and “Battlefield 1,” due out Oct. 21. Also in the pipeline are “Titanfall 2,” scheduled for fiscal Q3, and “Mass Effect: Andromeda,” set for late Q4. EA’s fiscal 2017 started April 1. EA ended fiscal 2016 with non-GAAP revenue of $4.57 billion, up 6% year over year. Earnings per share minus items rose 25% to $3.14 in the just-closed fiscal year. EA isn’t the only video game stock trading just below its record high. Take-Two Interactive Software ( TTWO ), which reports fiscal Q4 earnings after the market close Wednesday, hit an all-time high of 38.52 on April 4. Activision Blizzard ( ATVI ) notched a record high of 39.93 on Dec. 29. Take-Two stock was down a fraction, below 36, and Activision stock was up 1%, near 38.50, in afternoon trading Wednesday. RELATED: EA Stock Soars Like ‘Star Wars’ Millennium Falcon After Q4 Beat .

First Solar R&D ‘Paying Off,’ But Sales Remain ‘Uneven’: Argus

First Solar ‘s ( FSLR ) quarterly $31.5 million R&D spending average is starting to pay off, Argus analyst David Coleman said Wednesday, noting the No. 1 solar installer’s technology is becoming cost-competitive even without subsidies. Coleman rates First Solar stock a buy, but he slashed his price target to 66 from 90. Shares have pulled back 33% since hitting a 2016 high on March 18, as earnings last month missed Wall Street expectations. Over the past three months, First Solar stock has fallen 23.1% vs. a 6.8% gain in the S&P 500. But midday on the stock market today , First Solar stock was up nearly 2%, near 50. Shares of top rival SunPower ( SPWR ) were up a fraction, trailing IBD’s 20-company Energy-Solar industry group, which was higher by close to 2%, above 27, after touching a three-year low of 25.86 on May 10. The group ranks just No. 180 out of 197 groups tracked by IBD. First Solar stock was slammed on the company’s $100 million Q1 sales miss last month. Then, the firm announced CFO Mark Widmar would succeed CEO James Hughes, effective July 1. Hughes will join the board. But that sales miss was largely due to the timing of project revenue recognition, Coleman wrote in his research report. Predicting quarterly sales for developers like First Solar and SunPower can be tricky. This month, SunPower’s Q2 sales view lagged by $400 million. “Overall, we remain optimistic about the company’s long-term earnings power; however, investors should expect First Solar’s financial results to be uneven on a quarter-to-quarter and year-to-year basis due to the timing of revenue recognition,” he wrote. First Solar Rides Cadmium Telluride R&D During Q1, cash declined 3.5% sequentially to $1.1 billion, but First Solar remains profitable “even as its peers have been hurt by oversupplied markets and a lack of pricing power,” Coleman wrote. It investments in cadmium telluride technology are starting to pay off. “We see evidence that First Solar’s technological investments are paying off, as they have enabled the company to lower the cost of solar generation on a per-watt basis and to expand its opportunity set of utility-scale projects,” he wrote. Cadmium telluride should provide a cost advantage vs. more commoditized solar module technology such as polysilicon, Coleman wrote. In some markets, it’s becoming cost-competitive even without subsidies — a tough goal for solar companies still largely dependent on governmental whims. By 2025, First Solar expects to have 40 gigawatts in North American utility installations, implying 21.9% growth. The company also has bookings in Turkey, Japan, Australia, India and Africa, Coleman wrote. First Solar should also benefit from stricter environmental regulations on fossil-fuel-based power, and from increased government and public support for solar. Last year, the U.S. Congress extended the Investment Tax Credit (ITC) on solar by five years, avoiding a cliff in 2017 installations. The biggest risk lies in First Solar’s dependence on utility-scale deployments, Coleman wrote. “If the market for utility-scale solar power generation does not expand significantly over the next few years due to cost factors or technological or political developments, First Solar would likely experience slower-than-anticipated growth,” he said.