Citi Gives Color On Applied Materials Following Earnings

With another strong Quarter in solar, Applied Materials AMAT is raising 2011 EPS as end market diversification is working and helping to mask what remains static share in semis. While this is good and the stock may trade up slightly on this print, the "catch-up" trade that has driven the recent stock outperformance seems long in the tooth and the stock is now trading at a ~15% premium to peers based on current EPS run-rate. Positives include: another very strong order quarter for solar and margins better there too; F2011 raised and implies no falloff through year and there is still room for margin/tax improvement with operation transition to Asia. Negatives include: despite strong push, comparison of silicon revs to public data from SEMI does not indicate any share gain; semi margins apt to be pressured by Samsung settlement; stock is no longer an obvious candidate for the "catch-up" trade as it has outperformed peers past 3mos. Citi has a $17 PT and Hold rating on AMAT AMAT closed Thursday at $38.62