Chip stocks continue to surge. Here's how to buy one for less
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- Applied Materials reports earnings on Thursday, and analysts have revised earnings estimates higher amid constructive guidance.
- Applied Materials closed at $435.44 on Friday and trades above its rising 150‑day moving average, indicating technical strength.
- Applied Materials' forward price‑to‑earnings ratio is 33×, well above its five‑year average of 23×, highlighting valuation concerns.
- June 400/480 call spread on Applied Materials can be bought for $35.50, limiting risk to $35 and offering a max profit of $45, providing a defined‑risk alternative to buying the stock outright.
- Applied Materials has seen earnings growth accelerate over recent quarters, prompting analysts to revise earnings estimates higher.
Why it matters: Investors can capture the chip rally with only $35 at risk, preserving capital while still profiting from Applied Materials’ earnings surge; the limited‑risk spread reduces exposure to a valuation correction that would hurt outright shareholders.
