Despite a strong performance in F3Q, investors reacted to Lam Research (NASDAQ:LRCX) earnings report with some skittishness, sending LRCX’s shares down nearly 5% to $201 in early trading Wednesday.
The reason? F3Q’s shipments of $3.345 billion were $40 million below guidance which with CY18’s shipment linearity means Bears will assert the peak is now behind with a bigger rollover in 2H18 or 2019.
To the company’s credit, LRCX’s earnings beat Wall Street estimates and its revenues fell in line with expectations.
TipRanks #1 analyst Craig Ellis of B.Riley FBR commented, “We believe surging but modestly below-target F3Q shipments of $3.345B, F4Q’s robust $3.0B guide, and a modest 1H/2H decline stacks up well versus consensus expectations even as it offers Bear’s peak cycle fears some ammo. We frame the issue and offer two counterpoints. First, shipments surged 19% Q/Q to $3.345B but under-shot guidance by $40M/3% on new project product mix impacting four tools. Memory mix was 84% (NAND 57% and DRAM 27%), Foundry 10% (down 5%), and Logic was 6%. Mgmt expects Foundry and Logic to rise through CY18. Ahead, F4Q’s guide is $3.00B(-10%), a record excluding just-minted F3Q.”
“For CY18, a stronger 1H bias of ~100-200 bps is expected, a little more frontend loaded than expected three months ago as customer NAND plans pulled in. Bears will say that’s the sign of a peak but recall early-2017 views for H/H declines proved conservative. Further, we note F3Q and F4Q’s average annualized shipments of $12.28B are above our prior FY18-20 sales of $10.8B, $11.22B and $12.25B,” the analyst added.
Bottom line: “Overall, execution and guidance cause us to raise FY18-20 estimates materially closer to the target financial model’s trajectory, with EPS rising to $17.59, $17.32 and $19.60 respectively and with FY21 initiated at $21.80.”
As such, Ellis reiterates a Buy rating on Lam Research shares, with a price target of $285, which represents a potential upside of 34% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Craig Ellis has a yearly average return of 38.5% and a 81% success rate. Ellis has a 50.2% average return when recommending LRCX, and is ranked #1 out of 4788 analysts.