Lam Research’s Solid Customer Demand Sparks Multiple Buy Ratings

Specifically, Lam reported Q3 Non-GAAP EPS of $3.98 which beat the Street forecast by $0.27, while GAAP EPS of $3.88 beat by $0.30. However, revenue of $2.5B (+2.5% Y/Y) missed consensus estimates by $10M. The company also reported “record” backlog as it exited the March quarter.

“While there is limited visibility to near-term macroeconomic conditions and industry supply chain recovery, customer demand for our equipment remains strong” the company said.

LRCX did not issue financial guidance but on the call, management carefully hedged its outlook for semiconductor wafer fab equipment (WFE) in 2020.

While saying 2020 WFE may fall to the low- to mid-$50bn range, it did not officially retract prior guidance of mid- to high-$50bn, points out Needham analyst Quinn Bolton.

He reiterated his LRCX buy rating on April 23, but dropped his price target from $340 to $325 (20% upside potential).

While customer demand remains strong and there has been no change of plans by customers to date, management admits the COVID-19 recession may lead to some demand destruction in the future, he explains.

“Despite Lam’s more conservative stance, we continue to believe WFE can reach ~$55bn in 2020 and maintain our revenue estimates. However, we are making adjustments below the top line to reflect inefficiencies and a slowing buyback” Bolton wrote.

Overall, analysts share his bullish stance on the stock. TipRanks reveals that LRCX boasts a Strong Buy analyst consensus with an average analyst price target of $302 (11% upside potential). Six analysts have reiterated their buy ratings on April 23. The stock is currently trading down 7% year-to-date. (See LRCX’s stock analysis on TipRanks).

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