What Is Driving Lam Research Interest Higher

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When Lam Research Corp. (NASDAQ: LRCX) reported its fiscal second-quarter financial results late on Wednesday, the initial reaction was somewhat negative even though, ultimately, the earnings report was favorable. Despite the reaction by investors, analysts took a very positive outlook on the stock.

24/7 Wall St. has included some brief highlights from the earnings report, as well as what some analysts are saying after the fact.

The company said that it had $2.24 in earnings per share (EPS) and $1.88 billion in revenue, versus consensus estimates from Thomson Reuters of $2.19 in EPS and revenue of $1.84 billion. The same period of last year reportedly had EPS of $1.57 and $1.43 billion in revenue.

Merrill Lynch reiterated a Buy rating and raised its price objective to $140 from $130 after impressive earnings and a bullish outlook. The brokerage firm noted in its investment rationale:

Lam is the leader in etch equipment for semiconductor manufacturing. The company has developed a highly efficient business model that it is now attempting to leverage beyond etch through new products and acquisitions. The company is well exposed to the technology inflections in the semiconductor industry. This should allow Lam Research to continue to enjoy above market growth and strong earnings power.

At the same time, S&P’s equity research group issued a report saying:

We increase our 12-month target price to $130 from $115, on a near peers P/E of 14.8X our FY 18 (Jun.) operating EPS view. We raise our fiscal 2017 (Jun.) EPS estimate to $9.27 from $7.49 and fiscal 2018 to $8.76 from $7.80. LRCX posts Dec-Q EPS of $2.24 vs. $1.57, beating the $2.19 Capital IQ consensus. Sales rose 15% from Jun-Q, slightly better than expectations, led by higher memory demand. We see higher DRAM investments, as supply conditions remain tight, and believe the transition to 3D NAND represents a significant revenue opportunity. We see foundry sales remaining elevated.

A few other analysts weighed in as well:

  • B. Riley raised the price target to $150.
  • Cowen raised the price target to $125 from $105.
  • Deutsche Bank raised the price target to $135 from $125.
  • Goldman Sachs has a Buy rating and raised the target to $133 from $125.
  • JPMorgan raised the price target from $120 to $130.
  • Morgan Stanley raised the price target to $129 from $123.
  • RBC has an Outperform rating and raised its price target to $125 from $120.
  • Instinet has a Neutral rating and raised the target to $110 from $95.
  • UBS has a Buy rating and raised its price target from $116 to $135.

Shares of Lam Research were last seen down 2.6% at $113.89, with a consensus analyst price target of $120.22 and a 52-week trading range of $63.10 to $117.21.