Jim Lebenthal Sells Applied Materials Amidst Sector Weakness

Applied Materials Sell Decision

• 📉 Jim Lebenthal sold his position in Applied Materials (AMAT) due to terrible results and awful guidance, which came in 10% below street expectations.
• ⚠️ Lebenthal noted that AMAT has underperformed for the last six quarters and management gave no indication of improvement.
• 🎯 In contrast, Lamb Research and KLA Corp are executing well in the same sector, indicating an idiosyncratic challenge for Applied Materials.

Software Sector Outlook

• 💡 Lebenthal believes the software trade is not dead, and he is reserving final judgment on Adobe until its next earnings call in three weeks.
• 💬 He acknowledges competition but believes Adobe is meeting challenges, evidenced by continued daily use of PDF files.
• 🚀 Oracle is highlighted as being in the "sweet spot" of the AI trade, with excellent results, strong momentum, and all systems go, despite potential valuation concerns.
• 🌟 Microsoft and Palantir are also leading the software sector, with performance narrowing to these key players.

Cybersecurity and AI

• ⚠️ The cybersecurity group has experienced a modest correction, potentially due to beliefs about a pullback in IT spending.
• ⚡ Lebenthal finds this puzzling given the need for cybersecurity presence to address AI threats.
• 📈 Palo Alto Networks needs to show very strong guidance in its upcoming earnings report to restore positive momentum.
• 📌 CrowdStrike has been added to the tactical underperform list by Evercore ISI, with a target price reduction.

Other Software Mentions

• ☁️ Veeva Systems is a cloud-based software company in the healthcare sector that is performing remarkably well, up 44% over the last year with double-digit earnings growth.
• 📊 Lebenthal believes that incumbent seat-based software providers need to demonstrate how AI can help them generate more revenue on top of existing seats.