Lam Research: Top Pick In Equip’t Rebound, Says Citi
By Tiernan Ray
Citigroup’s chip equipment analyst Timothy Arcuri offers a post-earnings wrap on the equipment business following Applied Material’s ( AMAT) forecast last Wednesday of fiscal Q4 results below expectations, citing a breakdown in orders across its industry.
The current annual “run rate” for “wafer fab equipment” orders is $20 billion, as of this quarter, and $26 billion worth of shipments for the year, which is “unsustainable,” writes Arcuri. Shipments may fall again in Q4, but Arcuri expects orders to trend up.
He also thinks most of the cuts in estimates for equipment makers are done at this point, with EPS estimates for 2012 having come down 25% since June. The Street is modeling $30 billion in wafer fab equipment for the full year, and $27 billion in 2012, he writes.
And there are signs of life, according to Arcuri:
1) Samsung is raising its NAND new capacity plan for 2011 from 40K wspm addition to 60-80K wspm, with most of the upside expansion in CQ4; 2) Hynix has restored ~50% of its NAND capacity ramp pushed out in Jul, which adds 15K wspm spending in CQ4; 3) TSMC is signaling more confidence that IC inventory correction should be over by end-CQ3, and utilization rate will move up in CQ4; 4) INTC’s Fab 24/28 22nm orders are coming through in CQ3/4.
And thinks that with the group trading around 10 times an EPS “trough rate” that may be materializing this quarter and next, the stocks reflect most of the possible downside.
Hence, he recommends Lam Research ( LRCX) as likely to outperform the group in a rebound, “given its memory/foundry exposure and high % of rev in turn business.”
Lam shares today are up 86 cents, or 2%, at $38.16. |
