Kirk, Here is SimthBarney take on CMP win at TSMC.
I believe LRCX is still undervalued at even at this level.
Looking for $120-130 by sometime next year.
You can take some profit to ease your mind. But I think
you should stick with most of your holding till at least
early part of the next year. I know it has been an incredible runup but you have not seen the real run yet.
The 4th inning has just begun...Good luck..
10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B
--SUMMARY:--Lam Research Corporation--Semiconductor Equipment
Lam Research announced that the Teres CMP polisher has been chosen as the
Tool of Record for copper at TSMC.
The TSMC account penetration and the strong position in copper polishing
increases our visibility on the product turnaround and offsets any
potential declines due to the "cleaner" revenue stream.
Lam is well positioned to outperform its peer group. We will have a more
detailed update after the company's conference call on Thursday, Oct. 21st.
10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B
--EARNINGS PER SHARE--------------------------------------------------------
FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year
Actual 06/99 EPS $(0.70)A $(0.64)A $(0.38)A $0.28A $(1.42)A
Previous 06/00 EPS $0.50E $0.62E $0.77E $0.85E $2.75E
Current 06/00 EPS $0.50E $0.62E $0.77E $0.85E $2.75E
Previous 06/01 EPS $N/A $N/A $N/A $N/A $3.05E
Current 06/01 EPS $N/A $N/A $N/A $N/A $3.05E
Previous 06/02 EPS $N/A $N/A $N/A $N/A $N/A
Current 06/02 EPS $N/A $N/A $N/A $N/A $N/A
Footnotes:
10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B
--FUNDAMENTALS--------------------------------------------------------------
Current Rank........:2H Prior:No Change Price (10/18/99)....:$70.62
P/E Ratio 06/00.....:25.7x Target Price..:$75.00 Prior:No Change
P/E Ratio 06/01.....:23.2x Proj.5yr EPS Grth...:12.0%
Return on Eqty 99...:N/A% Book Value/Shr(99)..:12.89
LT Debt-to-Capital(a)40.1% Dividend............:$N/A
Revenue (00)........:N/Amil Yield...............:N/A%
Shares Outstanding..:38.4mil Convertible.........:Yes
Mkt. Capitalization.:2711.8mil Hedge Clause(s).....:
Comments............:(a) Data as of the most recently reported quarter.
Comments............:
10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00)
--OPINION:------------------------------------------------------------------
The TSMC Penetration Opens Up A Sizable Market Opportunity For Lam
Research...
We estimate that the total worldwide market for CMP will be $900 million
in 1999, a growth of 50% over 1998's market size of $600-$625 million.
We believe that the CMP market should grow 10%-20% faster than the
mainstream equipment market for at least the next 3-5 years. In the
current world of subtractive aluminum processing, CMP is mainly used for
1) tungsten polishing, 2) oxide polishing, 3) polysilicon polishing and
4) emerging applications such as STI (shallow trench isolation). In the
upcoming world of damascene processing, CMP will be mainly used for 1)
copper polishing, 2) tungsten polishing, and 3) other smaller
applications.
We believe that copper CMP is the biggest challenge facing the industry
currently due to various problems; 1) copper is typically very soft,
while the underlying barrier is extremely hard (and needs to be polished
also), 2) copper presents dishing and corrosion problems. Thus the
copper CMP winner stands to capture a significant proportion of the value
in the world of damascene processing. We believe that Lam Research and
Applied Materials are poised to dominate the market; Lam due to its
"revolutionary" linear polishing technology, and Applied due to its
significant installed base, and its module based solutions approach. We
believe that the increasing push on the part of semiconductor companies
to aggressively dual source also creates a solid market opportunity as
Lam is the only credible, well capitalized CMP competitor. We will have
a more detailed update after Lam's conference call on Thursday, but in
summary, we believe that the company's copper CMP products are out of the
starting blocks in a terrific shape, and while the market shares 2-3
years down the road are still to be decided, we believe that the company
stands to gain at least a 30% market share.
...And Removes Our Concern About The Slowdown In Cleaner Revenue Growth.
The strong start to the copper polisher also removes our concern
regarding the decline of the cleaner revenue stream. We estimate that
Lam Research currently derives $80-$100 million from the sales of its
post-CMP cleaners. With Applied Materials moving to the Mirra-Mesa
in-house cleaner, there were concerns on the rate of growth of the
post-CMP cleaner revenue stream. However, every polisher will probably
sell for 2.5 times the post-CMP cleaner, and we believe that it should be
relatively easy for the company to offset the potential decline of the
post-CMP cleaner with the Teres.
The Company Has Made Good Progress In New Etch Product Launches.
Recognizing the pricing pressures inherent in the etch market, the
company has moved to rapidly launch the Exelan, which offers both an
increased process capability and a better margin performance. In
addition, we believe that the company has made headway in regaining some
of the lost market share with Tokyo Electron and Applied Materials. Thus
the company is demonstrating a solid competitive posture in its core etch
markets.
Lam Still Trades At A Discount To Its Peer Group And This Discount Can
Easily Narrow.
While large/mid cap equipment companies such as Applied Materials,
KLA-Tencor and Novellus Systems are trading at 4.0-5.5 times next
calendar year's sales, Lam Research is currently trading at 2.7 times
calendar 2000 sales for two main reasons, 1) the company until recently
was a turnaround, and 2) difficult competitive scenario in etch and CMP.
Concern #1 has been put to rest with the tremendous operational
turnaround by the Bagley group, and we believe that over the course of
the next 6-9 months, the product/market share concerns will ease, thus
allowing a multiple expansion. In conclusion, we believe that Lam
Research is set to embark on the second stage of its turnaround, driven
by the new products in CMP and etch. We will have a more detailed update
after the company's 1Q00 earnings conference call on Thursday, October
21st. |
