Applied Materials, Inc. (AMAT) — DCF Valuation

Discounted Cash Flow intrinsic value with Bear, Base & Bull scenarios

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Applied Materials, Inc. (AMAT)

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Intrinsic Value (DCF)

Current$372.30

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Intrinsic$201.08

-46%

$134.95$201.08$332.58

Market implies 34% growth for 5 years

Growth 17%

Discount 10%

Terminal 3%

Current price reflects execution expectations above 17% growth — not unreasonable for quality businesses.

At $372, the market prices in continued strong cash flow growth (34%) — likely reflecting buybacks, margin stability, and ecosystem strength.

Range: Bear $135 → Bull $333. Current price implies expectations above the base case, closer to bull expectations.

Discount ↓Growth →	13%	15%	17%	19%
8%	$251	$272	$295	$320
10%	$172	$186	$201	$217
12%	$130	$140	$151	$163
14%	$104	$112	$121	$130

Bull Case

Bull case ($333) with 21% growth, 8% discount rate

Bear Case

Bear case ($135) implies 64% downside at 14% growth, 12% discount
Price reflects 34% growth expectations vs 17% historical — high bar to clear
Trading 46% above base case — execution must exceed assumptions to justify

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5-Year Free Cash Flow Projection

Year 1$6.68B

Year 2$7.82B

Year 3$9.17B

Year 4$10.74B

Year 5$12.59B

Terminal$199.47B

📐 Model Inputs

Growth Rate17.2%5Y CAGR (cascade: 5Y→3Y→TTM)

Discount Rate9.5%WACC estimate

Terminal Growth3.0%Perpetuity rate

Base Free Cash Flow$5.70BTTM actual

Bear g×0.8, r+2%

Base Historical CAGR

Bull g×1.2, r−1.5%

ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

Frequently Asked Questions

Is AMAT stock undervalued or overvalued?

🔴 OVERVALUED

AMAT trades at $372.30 vs. our DCF-derived intrinsic value of $184.57, implying -38% downside. Using a 9.5% WACC and 17.2% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($273.39) suggests limited upside.

What is AMAT's intrinsic value?

Using a 5-year DCF model: Base FCF of $5.70B, projected at 17.2% 5Y CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-686M net debt and dividing by 0.81B shares: Bear $123.97 | Base $184.57 | Bull $273.39. Current price $372.30 implies -38% to base case.

How is AMAT's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 17.2% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($148.44B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.

Our Methodology

Institutional-grade research documentation

DCF Intrinsic Value Methodology

Eligibility gates, reinvestor-aware FCF normalization, WACC logic, and sensitivity analysis.

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Applied Materials, Inc. (AMAT) — DCF Valuation