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

To: Jong Hyun Yoo who wrote (3425)	10/18/1999 9:52:00 PM
From: Jong Hyun Yoo	Read Replies (1) \| Respond to of 5867

Prudential upped the target to $90. Slowly but surely, people are finally noticing a huge potential behind this company's financial performance. EQUITY RESEARCH LAM RESEARCH OCTOBER 18, 1999 LRCX: BOOKINGS STRONG, PRICING FIRMING, MARGINS IMPROVING, LEVERAGE SIGNIFICANT - RAISING ESTIMATES AND PRICE TARGET. BUY THE STOCK BEFORE 1Q00 EARNINGS Subject: Lam Research (LRCX?$73 15/16)--OTC SEMICO OPINION Current: Accumulate Analysts: John W. Pitzer (650) 320-1633 Risk: High 12-Month Target Price: TO $90 FROM $60 Ind. Div.: -- Yield: -- Shares: 38.9 mil. 52-Wk.Range: 75-9 EPS FY Year P/E 1Q 2Q 3Q 4Q Current 6/99E ($2.89)E NM ($0.70)A ($2.16)A ($0.38)A $0.28 Current 6/00E $2.90E 25.5X $0.55E $0.68E $0.78E $0.90E Prior 6/00E $2.50E $0.50E $0.58E $0.66E $0.76E Current 6/01E $3.40 21.7X Prior 6/01E $2.40 INVESTMENT HIGHLIGHTS: *Current environment for Lam is extremely strong. We believe that the current environment for Lam is robust - It appears as though the company has re-gained momentum both in Asia and Europe in its core etch market. We believe the Company will post a book to bill for 1Q00 significantly above 1. Upside to our estimates. We believe there continues to be upside to our new EPS estimate for 1Q00 of $0.55, up from $0.50; current street consensus is $0.48. The Company is due to report results on October 21 after the market close. Upside in the quarter should be driven both by better revenue and better margins. The pricing environment for etch is improving dramatically. We are revising our estimates significantly to reflect better revenue and margins. It has been our contention Lam?s earnings model has the best leverage in the equipment industry. We are raising our estimates for FY00 to $2.90 (no tax) from $2.50 and for FY01 to $3.40 (taxed) from $2.40. Table 1 provides break-out of our earnings revision. We continue to believe upside exists to our 2001 estimates. Table 1 Earnings Revisions for Lam Research (Dollars in millions, except per share) 2000E New 2000E Old 2001E New 20001E Old Revenue $1071.0 $1035.0 $1289.5 $1217.5 Gross Margin 41.7% 40.8% 44.1% 41.8% Op?g Margin 11.0% 9.8% 14.6% 11.6% Net Income $119.3 $103.2 $140.4 $99.3 EPS $2.90 $2.50 $3.40 $2.40 Fully Txd EPS $2.03 $1.75 $3.40 $2.40 Source: Prudential Securities estimates. Taiwan appears to have been a positive for equipment companies. It appears that events in Taiwan (i.e. the earthquake and the disruption of capacity) has been a net positive for processing equipment companies. Many semiconductor companies inside and outside Taiwan appear to have stepped up order activity in the wake of the disaster. We believe this provides significant levels of visibility to the next two quarters. Valuation--Raising the price target to $90 from $60. In our view, Lam is a turnaround story finally coming to fruition. As such, we believed and still believe that Lam?s P&L had the most leverage in our universe - a combination of internal improvements in operating metrics as well as a cyclical turnaround in the business. We now believe that Lam should sell at a premium multiple for at least the next couple of quarters as numbers on the street move higher. Our new price target of $90 is 32 times our new calendar 2000 EPS estimate of $2.85, our previous estimate was $2.15. Prudential Securities Incorporated makes a primary over-the-counter market in the shares of Lam Research. Prudential Securities Incorporated (or one of its affiliates) or its officers, directors, analysts, or employees may have positions in securities or commodities referred to herein and may, as principal or agent, buy and sell such securities or commodities.