Why Lam Research (LRCX) Stock Is Trading Up Today

Anthony Lee /
2024/01/25 10:54 am EST

What Happened:

Shares of semiconductor equipment maker Lam Research (NASDAQ:LCRX) jumped 5% in the morning session after company reported second-quarter results that surpassed analysts' revenue expectations, driven by better-than-expected systems and customer support revenue. EPS also beat, and its inventory levels shrunk. On the other hand, its operating margin declined. Overall, this was a strong quarter that should satisfy shareholders. 

Following the results, Goldman Sachs analyst Toshiya Hari reiterated a Buy rating and raised the price target on the stock from $700 to $912. He added, "Although the Wafer Fab Equipment market is likely to trend sideways or grow only modestly in [2024], we believe Lam – who has strong competitive positions in Etch and Deposition and has disproportionately high market share in [high-bandwidth memory] – is well-positioned to outperform the market in [2024]." After the initial pop the shares cooled down to $889.10, up 4.8% from previous close.

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What is the market telling us:

Lam Research's shares are very volatile and over the last year have had 11 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock gained 9.4% on the news that the company reported fourth quarter results that exceeded analysts' revenue, operating profits, and earnings per share (EPS) expectations. Notably, EPS beat by an impressive 16%. Looking ahead, revenue and EPS guidance for the next quarter exceeded Consensus estimates, which was another major positive. Longer term, management also added that while generative AI is still in its early stages, it is an emerging growth driver for the company. It is estimated that every 1% penetration of AI in datacenters will result in an incremental $1.0 to $1.5 billion of wafer fabrication equipment spend, which benefits Lam Research.

Lam Research is up 18.6% since the beginning of the year. Investors who bought $1,000 worth of Lam Research's shares 5 years ago would now be looking at an investment worth $5,369.

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