Robert Maire
Moderator
Not much that AMAT can add that we don't already know -Things Still Suck
We will likely hear AMAT report in line and guide down (just like everyone else....)
The real question is how deep and long the downturn...
So far this quarter has been like groundhog day with a parade of companies in the semiconductor equipment space reporting more or less in line quarters and guiding Q4 down anywhere from roughly 15% to 25% (MTSN an outlier at 40% down).
It would be difficult for Applied to report significantly different given the relatively broad issues across memory, logic & foundry which are clearly industry wide. AMAT is not gaining significant share nor seeing growth from some groundbreaking new product that would offset the core shrinkage.
How deep and how long???
Obviously the real question is how deep the downturn and how long. Obviously Q4 is toast and its highly unlikely to bounce back strongly in Q1 of 2016. We seem to be hoping for a H2 2016 recovery. So if we are down in Q4 do we report yet another drop off in expectations after the end of the year or do we (hopefully) bounce along a bottom that is not too deep.
So the real hope or perhaps "whisper" hope is that AMAT reports "In Line" and guides down only about 15-20% and gives us body language "hope" that it doesn't continue to drop another 15-20% next quarter, after that.
Lokking for a further handle on a post TEL breakup world...
We continue to hope for more clarity and information as to how Applied is going to grow without buying TEL. Most of what we have heard is talk about cuts to reduce costs and some talk about share gains that appear hard to quantify but we still don't have a full blown game plan that makes us comfortable.
Lam's acquisition of KLA adds to questions on AMAT...
Lam has done an excellent job on dep and etch and the integration of Novellus a few years ago. Now looking ahead to KLA , theres not a lot to integrate but the combined Lam and KLA is likely larger than AMAT in the core semiconductor space. Its been a very, very long time since Applied was not the number one player and further, Lam appears to be the number one in many of the spaces it competes in with a combined KLA.
After Applied was just getting over the loss of TEL it now gets hit with Lam/Kla. Though it probably doesn't alter the game plan much it does likely represent more of a challenge to gain share or roll over a stand alone player.
AMAT the stock...
We don't see a lot of upside potential in the stock and instead see perhaps more downside beta. The stock seems to feel more at home around $15 per share where it had been hanging out and unless we hear something compelling the stock may settle back in that range after the quarter is reported.
ACLS overreaction to In Line and Down Quarter...
Just like everyone else in the space Axcelis reported a slightly better than in line quarter and guided down about 20% in Q4, roughly in the middle of the range of guidance we have seen in the from everyone else in the space. The upside potential of the Purion product remains the same as before the industry down turn and has been a fast grower with excellent potential. Axcelis has done a good job of gaining share and so far has not lost any back to AMAT.
The stock of ACLS got crushed and was down 22% for the day in what is clearly an overreaction as no other stock saw as negative reaction with similar results. In fact Mattson, which is similarly situated to ACLS, was the worst reporter of the industry this quarter, at down 40% revenue guidance and falling back into the red on EPS saw its stock stay roughly flat when it should have traded down.
We think the sell off is clearly not warranted in ACLS and the stock should trade back up when investors come to their senses and realize their report was no different than anyone else in the industry which got hit by the general industry slow down. Given that we heard zero company specific problems a 22% hit is clearly wrong and makes the stock cheap.
Brooks buys more bio and reports in line Quarter and down guidance...
As we have pointed out earlier in this note the standard report this quarter is for companies to report in line but guide down. BRKS is no different than anyone else coming in at $146M in revs and $0.17 in EPS versus street of $143M and $0.13.
As with everyone else they guided Q4 down to $110M to $117M and EPS ranging from a loss of 3 cents to a penny gain. This is a drop of roughly a bit more than 20%, toward the low end of the range of companies reporting so far this quarter, but in line from what we would expect from a sub supplier which tend to fall faster in a downturn, so no surprise here.
Brooks also announced that they were buying BioStorage Technologies for $127M to get roughly $40M in revenues. At more than three times revenues its quite expensive, certainly a lot more money than what you would pay for similar revenues in the semi space. Brooks has been paying a lot of money to get further into Bio. We hope it pays off in the long run because in the short run, results in Brooks Bio business has been a lot less than stellar. At the end of the day, Brooks remains a solid semiconductor company not a Biotech multiple kind of company though it likely has dreams of higher multiples associated with Bio otherwise they wouldn't be spending so much money.
Robert Maire
Semiconductor Advisors LLC
We will likely hear AMAT report in line and guide down (just like everyone else....)
The real question is how deep and long the downturn...
So far this quarter has been like groundhog day with a parade of companies in the semiconductor equipment space reporting more or less in line quarters and guiding Q4 down anywhere from roughly 15% to 25% (MTSN an outlier at 40% down).
It would be difficult for Applied to report significantly different given the relatively broad issues across memory, logic & foundry which are clearly industry wide. AMAT is not gaining significant share nor seeing growth from some groundbreaking new product that would offset the core shrinkage.
How deep and how long???
Obviously the real question is how deep the downturn and how long. Obviously Q4 is toast and its highly unlikely to bounce back strongly in Q1 of 2016. We seem to be hoping for a H2 2016 recovery. So if we are down in Q4 do we report yet another drop off in expectations after the end of the year or do we (hopefully) bounce along a bottom that is not too deep.
So the real hope or perhaps "whisper" hope is that AMAT reports "In Line" and guides down only about 15-20% and gives us body language "hope" that it doesn't continue to drop another 15-20% next quarter, after that.
Lokking for a further handle on a post TEL breakup world...
We continue to hope for more clarity and information as to how Applied is going to grow without buying TEL. Most of what we have heard is talk about cuts to reduce costs and some talk about share gains that appear hard to quantify but we still don't have a full blown game plan that makes us comfortable.
Lam's acquisition of KLA adds to questions on AMAT...
Lam has done an excellent job on dep and etch and the integration of Novellus a few years ago. Now looking ahead to KLA , theres not a lot to integrate but the combined Lam and KLA is likely larger than AMAT in the core semiconductor space. Its been a very, very long time since Applied was not the number one player and further, Lam appears to be the number one in many of the spaces it competes in with a combined KLA.
After Applied was just getting over the loss of TEL it now gets hit with Lam/Kla. Though it probably doesn't alter the game plan much it does likely represent more of a challenge to gain share or roll over a stand alone player.
AMAT the stock...
We don't see a lot of upside potential in the stock and instead see perhaps more downside beta. The stock seems to feel more at home around $15 per share where it had been hanging out and unless we hear something compelling the stock may settle back in that range after the quarter is reported.
ACLS overreaction to In Line and Down Quarter...
Just like everyone else in the space Axcelis reported a slightly better than in line quarter and guided down about 20% in Q4, roughly in the middle of the range of guidance we have seen in the from everyone else in the space. The upside potential of the Purion product remains the same as before the industry down turn and has been a fast grower with excellent potential. Axcelis has done a good job of gaining share and so far has not lost any back to AMAT.
The stock of ACLS got crushed and was down 22% for the day in what is clearly an overreaction as no other stock saw as negative reaction with similar results. In fact Mattson, which is similarly situated to ACLS, was the worst reporter of the industry this quarter, at down 40% revenue guidance and falling back into the red on EPS saw its stock stay roughly flat when it should have traded down.
We think the sell off is clearly not warranted in ACLS and the stock should trade back up when investors come to their senses and realize their report was no different than anyone else in the industry which got hit by the general industry slow down. Given that we heard zero company specific problems a 22% hit is clearly wrong and makes the stock cheap.
Brooks buys more bio and reports in line Quarter and down guidance...
As we have pointed out earlier in this note the standard report this quarter is for companies to report in line but guide down. BRKS is no different than anyone else coming in at $146M in revs and $0.17 in EPS versus street of $143M and $0.13.
As with everyone else they guided Q4 down to $110M to $117M and EPS ranging from a loss of 3 cents to a penny gain. This is a drop of roughly a bit more than 20%, toward the low end of the range of companies reporting so far this quarter, but in line from what we would expect from a sub supplier which tend to fall faster in a downturn, so no surprise here.
Brooks also announced that they were buying BioStorage Technologies for $127M to get roughly $40M in revenues. At more than three times revenues its quite expensive, certainly a lot more money than what you would pay for similar revenues in the semi space. Brooks has been paying a lot of money to get further into Bio. We hope it pays off in the long run because in the short run, results in Brooks Bio business has been a lot less than stellar. At the end of the day, Brooks remains a solid semiconductor company not a Biotech multiple kind of company though it likely has dreams of higher multiples associated with Bio otherwise they wouldn't be spending so much money.
Robert Maire
Semiconductor Advisors LLC