LRCX was down nearly 5% yesterday after hours... now in premarket it is only down less than 2%. It seems others see what we read of the news. It would not surprise me if it ended today in the green.
Lam Research falls, but Wall Street defends after margin 'reset'
seekingalpha.com
Oct. 19, 2023 8:48 AM ETLam Research Corporation (LRCX)AMAT, ASML, KLAC
By: Chris Ciaccia, SA News Editor
Semiconductor capital equipment firm Lam Research (NASDAQ:LRCX) fell around 2.5% in pre-market trading on Thursday after it reported mixed guidance, though several Wall Street analysts came to its defense.
Citi analyst Atif Malik, who has a buy rating and $800 price target on Lam Research (LRCX) shares, said the guide down in gross margins is likely the result of the decline. However, margins should "normalize" and the operating leverage should slow down next year, due to increased R&D spending on new products.
"While not providing 2024 [wafer fab equipment] expectations, management acknowledged customers are starting to sound a bit more positive," Malik wrote in an investor note.
Malik reiterated his stance that wafer fab equipment spending next year will be $82B and $88B, but services should rebound as memory and foundry and logic utilizations improve.
"Fundamentally, equipment stocks move higher with memory stocks as memory prices rebound," Malik added.
Looking ahead, Lam Research expects second-quarter revenue to be $3.7B, plus or minus $300M, with gross margins between 45.5% and 47.5%. It also expects earnings per share to be $6.78 per share, plus or minus 75 cents.
A consensus of analysts were anticipating earnings of $6.77 per share on $3.65B in revenue for the second-quarter.
Deutsche Bank analyst Sidney Ho, who also has a buy rating on Lam Research (LRCX), said the company is still seeing "favorable" dynamics in China, which helped the company's first-quarter results.
He also noted that Lam Research (LRCX) does not expect any "material impacts" from the new export regulations, in stark contrast to what ASML (ASML) said.
However, Ho said the concerns about fiscal 2024 gross margins and operating expenses are something to monitor and could impact earnings per share. As such, he lowered his 2024 earnings estimates.
"With the pullback in after-hours trading, shares are trading at ~16x CY25E EPS and we believe risk-reward is attractive," Ho wrote.
Goldman Sachs analyst Toshiya Hari also defended Lam Research, calling the margin reset for 2024 a "clearing event."
"While we expect management commentary pointing to a potential normalization in customer mix and increase in R&D spending in [calendar 2024] to weigh on Street margin expectations, we reiterate our Buy rating ... as we see today’s margin re-set as a potential clearing event and remain constructive on Lam’s position as a long-term share gainer within the context of the overall Wafer Fab Equipment market," Hari wrote in an investor note.
He explained that the company's investments in gate-all-around transistors, advanced packaging, EUV dry resist and backside power delivery should pay dividends over the medium-to-long-term.
Other semiconductor equipment stocks were mixed in pre-market trading on Thursday, as ASML (ASML) rose 3.8%, while Applied Materials (AMAT) and KLA Corp. (KLAC) slipped fractionally.
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