Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Lam Research (LRCX, NASDAQ): To the Insiders -- Ignore unavailable to you. Want to Upgrade?

To: EACarl who wrote (3171)	7/30/1999 6:08:00 PM
From: Jong Hyun Yoo	Read Replies (4) \| Respond to of 5867

Here is Smithbarney feedback on LAM's earning. They are finally seeing some value in this stock. Again, I would like to emphasize that there are much room in this stock for the upward movement. 07/30/99 Lam Research Corporation (LRCX $48.25,2-H,Tgt $62) --OPINION:------------------------------------------------------------------ While we still have overall macro industry concerns regarding an order flattening in late 1999/early 2000, Lam has accomplished a spectacular turnaround and we believe the stock could work even if the other equipment stocks do not. The company returned to profitability with a huge earnings upside surprise of $0.28 versus our estimate of $0.10 (consensus-$0.12). We had believed there was a clear possibility of upsides to the quarter but the magnitude of the upside was beyond our grandest expectations. We are raising our FY00 EPS estimate to $2.75 from $1.67 and FY01 to $3.05 from $2.34. With the stock trading at a significant discount to Applied Materials, Novellus Systems and KLA-Tencor, we believe there is good potential for the stock to close the valuation gap. Lam is trading at a mere 1.8x calendar our calendar 2000 sales per share estimate of $27.1 versus 4x for Applied, 4.2x for KLA-Tencor, and 3.5x for Novellus. We are raising our price target to $62, or 25x our fully taxed calendar 2000 EPS estimate of $2.46, from $51 or 25 times our prior calendar 2000 earnings estimate of $2.01. Lam Announces A Stunning 4Q99 Actual Estimate Revenues $211 million $190 million Gross margin 38.8% 38.0% Operating expenses 33.5% 35.7% EPS $0.28 $0.10 Lam announced a spectacular 4Q99 with EPS of $0.28 versus our estimate of $0.10 (consensus-$0.12). Revenues increased 38% to $211 million, substantially higher than our estimate of $190 million, driven by strength in North America and Asia-Pacfic (foundries) and also by pull-ins as deliveries to customers were accelerated. The geographic break-out of revenues was US-38%, Europe-16%, Asia-Pacific-39%, and Japan-7%. Gross margins improved by 330 basis points sequentially to 38.8%, and beat our 38.0% estimate by 80 basis points. The improvement in margins were driven by lower materials costs, faster cycle times and installation, and improved absorption of overhead costs. ...Strong Orders Driven By The Strength In Asia-Pacific, North America. Orders continued strong and increased to approximately $255-$260 million, which led to a book-to- bill ratio of 1.2 plus. Orders were particularly driven by the US and foundries in Taiwan. Most notably guidance for September and December quarter is for continued sequential order growth with management mentioning the possibility of "order pull-ins" from early 2000 into late 2nd half of 1999. We believe that the overall industry will report flattish orders in the second half of the year, but believe that smaller companies such as Lam Research could quite well outperform such as scenario by focused market share gain efforts. We will have more insights into the second half order activity as we head to Asia next week to visit Japan, Korea and Taiwan. The Teres is being evaluated at 5-6 sites in the field with the volume AMD purchase order booked in 1Q00 (September-99). We are modeling Lam's total. CMP revenue to grow from $75 million in 1998 to $120 million in 1999 and $150 million in 2000. The Exelan is generating excellent interest from early evaluations and the company plans to accelerate its ramp in the second half of 1999. Incredible Operating Expense Control We were again amazed by the company's operating expense control. Despite revenues rising 38% sequentially, operating expenses increased a mere 3% to $71 million. Management's conscious decision to hold operating expenses flattish despite rising revenues has resulted in incredible operating leverage. As a percentage of sales, operating expenses declined from 45.1% in 3Q99 to 33.5%, well below our 35.7% estimate. We were particularly impressed with the sequentially flat SG&A expenses of $33 million (15.7% of sales vs. our 17.4% est.). Reflecting the company focus on developing new products, R&D expenses increased 5% to $38 million (17.8% of sales vs. our 18.3% est.). DSOs declined to an impressive 74 days with head count flat in 4Q99 at 2,700 (expected to go up to 3,000 in fiscal 2000). Raising Estimates in FY00 and FY01 Following the better than expected results and upbeat outlook, we are raising our fiscal 2000 EPS estimate to $2.75 from $1.67. The higher earnings are the result of a higher revenue forecast of $1.04 billion versus $900 million previously and the accompanying operating expense leverage (we are lowering our operating expense estimate to 32.1% from 34.8%). Our gross margin estimate of 42.9% remains unchanged. We are also raising our FY01 EPS estimate to $3.05 from $2.34 due to higher revenues ($1.2 billion vs. $1.06 billion previously) and better operating expense leverage (30.5% vs. 31.9% previously), while our gross margin estimate of 45.8% remains unchanged. Maintain 2H (Outperform, High Risk) Rating, Raising Price Target to $62 We are raising our price target to $62, or 25x our new fully taxed calendar 2000 earnings estimate of $2.46, from $51, or 25x our previous calendar 2000 estimate of $2.04. Trading at 19 times calendar 2000 earnings and 1.8 times calendar 2000 sales, we believe that the shares offer an attractive risk/reward. Lam has performed an incredible operational turnaround and while the overall industry order flattening concerns may depress any share price appreciation for other equipment stocks, this stock could very easily work over the next 3-4 months. We reiterate our 2H (Outperform, High Risk)