Applied Materials stock forms a rare bullish pattern ahead of earnings

Applied Materials stock price has pulled back from last week’s high of $200 to the current $185. It remains about 50% above the year-to-date low as investors focus on its upcoming quarterly earnings on Thursday. It has formed an inverse head-and-shoulders pattern, pointing to a rebound ahead or after its earnings.

Applied Materials stock price analysis ahead of earnings

The daily chart shows that the AMAT stock price bottomed at $123 in April and then rebounded to a high of $200, as we predicted here. This rebound happened as most American and global companies surged. 

Most recently, the AMAT stock price has pulled back to a low of $175. A closer look shows that it has formed the highly bullish inverse head-and-shoulders pattern. 

In this case, the head is at $123, while the left shoulder is at $158 and the right one is at $174. The neckline is at the psychological point at $200. 

The stock moved above the 50-day and 100-day Exponential Moving Averages (EMA). Remaining above the two averages is a sign that bulls are in control. 

Therefore, the stock is likely to experience a bullish breakout after its earnings report this week. If this happens, the next key level to watch will be at $200. A move above that level will point to more gains in the coming months. 

The stock’s long-term outlook is bullish, with the key resistance level to watch being at $277. This target is estimated by first measuring the distance from the neckline and the head. In this case, the distance is 38%. 

Measuring the same distance from the neckline gives the target at $277. For this to happen, the surge will be confirmed if it moves above the resistance at $253, the highest swing in July last year. 

AMAT earnings ahead

The next important catalyst for Applied Materials is its upcoming earnings on Thursday. These results will provide more color on what to expect in the coming months.

The most recent results showed that the company’s revenue rose by 7% to $7.1 billion in the second quarter. Its gross margins rose to 49.1% from 47.4%, while its net income soared by 24% to over $2.1 billion. 

This growth was driven by the ongoing artificial intelligence (AI) tailwinds as the data center business thrived. Recent earnings showed that some of its customers, like Microsoft, Google, Meta Platforms, and Amazon, continued soaring. 

Applied Materials’ semiconductor systems revenue rose to over $5.25 billion from $4.9 billion. Its Applied Global Services recorded strong growth, with the revenue rising to $1.56 billion. 

Analysts believe that the company’s revenue will come in at $7.21 billion, up by 6.42% YoY. Its annual revenue is expected to be $28.79 billion, up by 5.93% YoY. 

Applied Materials’ earnings per share (EPS) is expected to come in at $2.36, up from $2.12 in the same period last year. 

Most importantly, the company is expected to continue returning funds to investors. It returned $2 billion to investors in the last quarter, driving the outstanding shares to 802 million from 917 million in 2020. 

Read more: Applied Materials stock: Is AMAT a bargain ahead of earnings?

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