Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nasdaq  >  Lam Research Corporation    LRCX

Delayed Quote. Delayed  - 06/27 10:00:00 pm
144.62 USD   -2.93%
06/16LAM RESEARCH CO : One Of Our Top Performers
06/05 LAM RESEARCH CO : ex-dividend day
05/23 LAM RESEARCH CO : LRCX) Files An 8-K Departure of Directors or Certa..
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
Analysis summary4-Traders Strategies 

One Of Our Top Performers

share with twitter share with LinkedIn share with facebook
share via e-mail
06/16/2017 | 09:20am
Potential: 34.70%
NASDAQ
Semiconductor Equipment & Testing

Lam Research (Lam) displays a full five star Surperformance® investment rating beating 99% of our worldwide stock coverage. It is thus unsurprising that our USA Portfolio has owned shares of LAM Research for roughly a year.

Lam outperforms the large majority of publicly traded companies thanks to great execution in serving strong demand from a rapidly growing market place with superior products. Within its industry - semiconductor equipment providers - Lam has been outperforming its peers in terms of revenue growth over the past few years.

Although the stock has already gained over 100% since our purchase roughly a year ago, we believe that this is not the end of the line, as we explain in this article.

Background Information

Lam is market-leading equipment supplier (to producers of semiconductors) offering critical chip-processing capabilities, which helps companies produce the high-performing electronic devices that the world has gotten accustomed to in such a small number of years.
Producing the tiny, complex chips used in these devices involves the repetition of a set of core processes and includes hundreds of individual steps. To do this successfully, semiconductor manufacturers require sophisticated processes and fabrication equipment. Lam is at the cutting-edge when it comes to providing such equipment.
Advanced microchips are in many of the familiar products people use every day both knowingly and unknowingly —from mobile phones and computing devices to entertainment gadgets and the latest array of features on cars. Electronic products are everywhere and life without them has become unimaginable. As can easily be observed, the electronics market keeps on broadening out. Many of us remember the time when there was only one smart electronic device in the household, the PC, whereas nowadays a household is full of them not to mention the extensive new areas of application in new use cases, such as the cloud or artificial intelligence.
Creating the cutting-edge microprocessors and memory devices for today’s products is extremely challenging and requires precision control at the atomic scale. Against this backdrop, Lam continues to develop the new capabilities required to manufacture increasingly complex devices with shrinking dimensions. Its innovative technology and productivity solutions for transistor, interconnect, patterning, advanced memory and advanced packaging applications deliver a wide range of wafer processing capabilities needed to create the latest chips.
The steps of the wafer fabrication process are laid out below:


Source: Company Website

With an aim to maximizing its resources, Lam also caters to applications that do not require the most advanced wafer processing capability. In these cases Lam offers proven solutions with a suite of previous-generation legacy products and solutions for the MEMS and LED manufacturing markets.
As the leader for etch products (which connect the individual components that form an integrated circuit) Lam is very well positioned for the trend to verticality in devices. As the physical limits have been reached in terms of what can be built into devices in the two dimensional plain, designer are increasingly looking to build “the insides” of devices in three dimensions. Lam’s technology is ideally positioned to take advantage of this major trend.
Significant market share gains (in waver fabrication) provide evidence of Lam’s success. Its market share has grown from 26% to 35% over the past couple of years. This is on top of very strong market fundamentals meaning Lam is in the right place at the right time and doing all things right.

Recent growth rates have been impressive. Shipments in Q1 2017 were up by 25% relative to Q4 2016, revenue increased 16% qoq. During a recent investor conference, the company’s management indicated that numbers in Q2 2017 were up again significantly.

Lastly, a boost could come from a tax reform on cash parked abroad. Of Lam’s cash balance of USD 2bn roughly 75% is held abroad as the high US tax rate dissuades CFOs from repatriating cash. Donald Trump has vowed to enable companies to bring back their cash at a very favorable tax rate. This could put Lam in a position where it could return a significant amount of cash to investors.

Investment Case

- Lam experiences an expanding market place, which is expected to prevail for a number of years due to the omnipresence of electronic devices
- On top of overall market growth Lam has been gaining market share in recent years
- Attractive valuation with a 2018 PE ratio of 15.6x.
- Trend in upward revision of earnings estimates by analysts. This trend is unlikely to have reached its top



Risks and Weaknesses

The main risk perceived in the semiconductor industry is always cyclicality. However, more and more experts acknowledge that the cyclical nature of the industry has abated for several reasons. There has been a significant degree of consolidation. Investment is managed much more carefully. And, the extensive broadening of the client base (large variety of devices, AI, cloud, etc.) has led to a situation where the cyclicality in the semi conductor industry has become largely macro-driven.

Valuation

There are several reasons why we see additional upside for this stock.
First of all, Lam trades at a significant discount to certain peers, such as ASML (2018 PE of 15.5x vs. 22.7x). Secondly, as EPS have recently come in above the high end of guidance, analysts’ earnings estimates will see upward revisions, which will have the effect of lowering forward earnings based valuation. Thirdly, in light of a 2018 PE ratio of “only”15.6x it can be argued that the market is overlooking the fact that 25% of Lam’s revenue is derived from service business. This is essentially an annuity stream as Lam will generate service fee for spare, upgrades, refurbishment and service over product life cycles of 15-20 years. Typically, this type of revenue commands a higher multiple. At Lam, the service component within its revenue is forecast to go up from the current level of 25%.
Our target price for the stock over the medium term is USD 200, which represents an upside of 35%.



Disclosure: 4-traders.com’s Investor portfolio USA currently owns 45 shares in Lam Research Corporation.


Ulrich Ebensperger
© Zonebourse.com 2017
share with twitter share with LinkedIn share with facebook
share via e-mail

Disclaimer: 4-traders.com is a website published by SURPERFORMANCE SAS. Surperformance or 4-traders.com is not a registered broker-dealer nor a registered investment adviser. You understand that this web site and its content is furnished for your personal, noncommercial, informational purposes only, and that no mention of a particular security in this website constitutes a recommendation to buy, sell, or hold any other security, nor that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Surperformance and 4-traders.com services will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Information regarding trading and investment as provided by Surperformance professional is not tailored to the investment needs of any specific person. You acknowledge that you are responsible for your own financial decisions and should seek a registered financial agent depending on your own risk tolerance to advise you on your personal trading activities.

Company
Designs, manufactures and markets semiconductor processing equipmentLam Research Corp. engages in the manufacture and service of wafer processing semiconductor manufacturing equipment.Its products include front-end wafer processing, back-end wafer-level packaging, and other related products.The... 
More about the company
Advertisement
Financials ($)
Sales 2017 7 988 M
EBIT 2017 2 066 M
Net income 2017 1 689 M
Finance 2017 2 890 M
Yield 2017 1,07%
P/E ratio 2017 15,19
P/E ratio 2018 14,91
EV / Sales 2017 2,56x
EV / Sales 2018 2,28x
Capitalization 23 329 M
More Financials
Chart LAM RESEARCH CORPORATION
Duration : Period : Day
Lam Research Corporation Technical Analysis Chart | LRCX | US5128071082 | 4-Traders
Duration : Period : Week
Lam Research Corporation Technical Analysis Chart | LRCX | US5128071082 | 4-Traders
Surperformance© ratings  Help  
Fundamental ratings
Overall rating
Trading Rating
Investor Rating
Growth (Revenue)
Valuation
Finances
Profitability
Earnings quality
Business Predictability
P/E ratio
Potential
Yield
Consensus
7 days EPS revision
4 months EPS revision
1 year EPS revision
4 months Revenue revision
1 year Revenue revision
Technical ratings
Short Term Timing
Middle Term Timing
Long Term Timing
RSI
Bollinger Spread
Unusual Volumes
More Ratings