Applied Materials tumbles as DoJ probe report clouds Q4 earnings beat
Applied Materials said it has received a subpoena from the U.S. Attorney's Office "requesting information related to certain shipments to China."
Updated at 7:35 AM EST
Applied Materials (AMAT) - Get Free Report shares tumbled in early Friday trading following a report that the chip equipment maker has been targeted by the U.S. Department of Justice for allegedly evading export restrictions on high-tech components to customers in China.
Reuters reported late Thursday that the DoJ is probing the group over sales it made to China-based chipmaker SMIC through a subsidiary in South Korea.
The exports restrictions, which were expanded last month, are designed to limit China's access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications," according to U.S. Trade Secretary Gina Raimondo.
Applied Materials would only say that its received a subpoena from the U.S. Attorney's Office requesting information related to certain shipments to China.
The news clouded the group's better-than-expected fourth quarter earnings, which saw is bottom line rise 29% from last year to $2.12 per share, firmly ahead of Street forecasts, with revenues essentially flat at $6.72 billion.
The group also forecast solid current quarter sales around $6.5 billion with earnings in the region of $1.90 per share.
"The October 2023 export control rule changes in the U.S. were primarily focused on alignment with other countries," CEO Gary Dickerson told investors on a conference call late Thursday.
"The rules are complex, and while we are working with the government to clarify certain details, we see no incremental material impact to Applied at this time," he added. "As I look ahead, I strongly believe that Applied Materials has the right capabilities, strategy, and partnerships."
Applied Materials shares were marked 7.3% lower in pre-market trading to indicate a Friday opening bell price of $143.50 each, a move that would trim the stock's six-month gain to around 14.2%.
"We think Applied Materials' results and guide were generally unsurprising," said KeyBanc Capital Markets analyst Steve Barger, who carries a 'sector weight' rating on the stock.
Like peers, Applied Materials' mix was significantly skewed toward China, which generated 44% of revenue, and the company indicated F1Q would have similar mix," he added. "For FY24, Applied Materials expects growth in leading edge foundry/logic and memory, offset by lower ICAPS demand following significant growth in FY22 and FY23."
- Action Alerts PLUS offers expert portfolio guidance to help you make informed investing decisions. Sign up now.
What's Your Reaction?
