Lam Research Stock Dips Despite Strong Earnings, Earns Upgrade to Buy

By Senad Karaahmetovic

Shares of Lam Research (NASDAQ:) are down about 2% in early Thursday trading after the chipmaker reported better-than-expected earnings.

Lam an adjusted EPS of $10.42, easily ahead of the $9.57 billion consensus. Revenue surged 18% to $5.07 billion, again better than the consensus. The adjusted operating margin came in at 33.3% to top the expected 31.3%.

For this quarter, the company sees EPS of $9.25-$10.75 with the midpoint coming in better-than-expected relative to the consensus of $9.47. Revenue is seen between $4.8 billion and $5.1 billion, again better than the consensus of $4.91 billion.

Lam also provided a preliminary CY2023 Wafer Fab Equipment (WFE) market outlook that sees a 20% drop YoY to around $73 billion.

Summit Insights Group analysts upgraded the LRCX stock to Buy as they see more positive risk-reward.

“We have been concerned with LRCX’s high exposure to the NAND market and the domestic Chinese memory IDMs. We believe the reduction in the 2023 WFE expectation now reduces any material downside risk for the stock. We continue to believe LRCX is well positioned in the longer term, driven by increased complexity in patterning for the next few generations of 3D NAND, advanced logic, and future-generation DRAM,” the analysts wrote in a client note.

Goldman Sachs analysts believe the WFE market could bottom earlier than anticipated due to the significant weakness in memory WFE spending and China export limits.

“We reiterate our Buy rating on LRCX given favorable risk-reward, and expect a) share gains, particularly in leading-edge logic and foundry, b) gross margin expansion, supported by a normalization in freight, component costs, and factory utilization as well as Lam’s pricing actions, and c) disciplined opex management, to drive through-cycle earnings growth in excess of the industry average,” the analysts explained in a note to clients.

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