Brian and Thread,
I listened to the LRCX conference call this morning and read the Merrill Lynch research report on LRCX. I don't think the LRCX team sell themselves as well as the KLAC team, but LRCX seems to be doing very well. Sales, orders, and profitability measures look great, just as they looked for KLAC.
In both the KLAC and LRCX conference calls, the real question everyone wants an answer to is how long will the good times last. No direct questions are put forth, so no direct answers are given. Two snippets interested me, one from each call. In the KLAC call, management said that the $500M of new orders in the December quarter were made up of "slices" from many companies and many fabs. In the LRCX call, Bagley said that a $40B investment at each technology node was necessary to achieve the required volume of wafer output and that he hasn't seen much at 130 nanometer and below. Both comments tend to support a longer, slower up turn.
Merrill predicts $1.50 EPS for LRCX in FY05. They believe LRCX can sell at a PE of 25 times this number, or $37.50. A double by 2007 and a PE of 20 gives a peak price of $60. The Merrill numbers for KLAC were for CY05, while the LRCX numbers were for FY05. Since both end the fiscal year in June, the discrepancy makes no sense. I suspect CY05 EPS will exceed FY05 EPS for both. |
