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Lam Research (LRCX) Gains 22.7% YTD: What's Next for Investors?
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Lam Research (LRCX - Free Report) has seen its stock price climb 22.7% year to date, underperforming the industry’s growth of 28.1% while outperforming the S&P 500 index’s rise of 17.1%.
The LRCX stock is currently trading below its 50-day moving average, indicating a bearish trend.
A challenging global macroeconomic environment due to rising geo-political tensions and persistent inflation are major concerns for the leading global supplier of innovative wafer fabrication equipment.
LRCX Trading Below 50-Day SMA
Image Source: Zacks Investment Research
Nevertheless, Lam Research is benefiting from its strong positioning in the semiconductor industry, which is witnessing a solid rebound this year. Continuous deal wins and an improving demand-supply environment for memory chips are tailwinds.
The company’s strength in deposition and etch, core competencies in areas such as nanoscale applications enablement, chemistry, plasma and fluidics, and advanced systems engineering are major positives.
Given both risks and rewards, the question that arises is whether Lam Research will be able to sustain its strong rally and growth in the future.
Lam Research stands strongly to benefit from the ongoing recovery in the semiconductor industry. Improving memory spending on the back of the growing proliferation of AI and machine learning, as well as Generative AI, is the prime driver for the company.
Increasing AI's transformative use cases in both consumer and enterprise markets require significant investment in semiconductor manufacturing capacity to address the rising demand for advanced compute, memory and storage. Lam Research is well-positioned to capitalize on this on the back of its strength in wafer fabrication equipment.
AI's impacts on storage represent a strong growth opportunity for the company’s NAND business as advanced AI applications need faster, more power-efficient and higher-density NAND storage.
LRCX’s growing investments in expanding semiconductor fabrication capabilities, research and development activities, and Semiverse solutions are noteworthy.
Lam Research’s strong customer-centric lab investments in Korea, Taiwan and the United States to accelerate wins in both DRAM and foundry/logic advanced packaging are positives.
With Semiverse solutions’ digital twin capabilities, Lam Research optimizes multi-dimensional etch and deposition process recipes faster, and reduces the time and cost of technology development.
In deposition, the company is leading the transition from tungsten to molybdenum to improve device access time and reduce stack height per storage cell.
It leverages a high aspect ratio cryogenic etch to boost the productivity of memory hole formation. Its approach to 1,000 cryogenic etch chambers in its high-volume manufacturing installed base is a plus.
With Semiverse simulation tools, LRCX has accelerated innovation in NAND high aspect ratio memory hole etch production.
The company’s SABRE 3D and Syndion tools, which feature strong plating and etch capabilities, and deliver industry-leading throughput and productivity, are ideal for AI servers using high bandwidth memory.
Lam Research’s tools also enable foundry logic inflections, on the back of which it is gaining strong customer momentum.
Conclusion
The proliferation of AI, the global push for localized chip manufacturing capacity, and the ubiquity of semiconductors in new consumer and commercial products represent solid long-term growth opportunities for Lam Research. As AI drives a greater need for faster and more power-efficient devices, the company’s accelerating product innovation bodes well.
With the gradual improvement in memory spending, Lam Research expects NAND to benefit from technology upgrades, and DRAM to benefit from node conversions and capacity additions in high bandwidth memory this year. Meanwhile, its leading-edge investments are expected to benefit the foundry/logic category. All these are expected to drive its top-line growth in the long run.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $17.14 billion, indicating year-over-year growth of 15.5%.
However, escalating tensions between the United States and China due to the imposition of export curbs on China’s chip companies by the U.S. Department of Commerce have been major headwinds.
Although there has been a modest recovery in the memory category, sluggish wafer fabrication equipment spending remains concerning for Lam’s prospects.
Moreover, in the booming AI era, the company faces stiff competition from peers like Applied Materials (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) , which do not bode well for its market position.
The Zacks Consensus Estimate for LRCX’s fiscal 2025 earnings stands at $35.25 per share, indicating year-over-year growth of 18.8%. The estimate has been revised downward by 0.1% over the past seven days.
Image Source: Zacks Investment Research
Lam Research’s Value Style Score of D also suggests a stretched valuation at this moment.
Risk-averse investors should wait for a better entry point, given the uncertainties surrounding the company's growth prospects and the competitive pressure it faces.
Image: Bigstock
Lam Research (LRCX) Gains 22.7% YTD: What's Next for Investors?
Lam Research (LRCX - Free Report) has seen its stock price climb 22.7% year to date, underperforming the industry’s growth of 28.1% while outperforming the S&P 500 index’s rise of 17.1%.
The LRCX stock is currently trading below its 50-day moving average, indicating a bearish trend.
A challenging global macroeconomic environment due to rising geo-political tensions and persistent inflation are major concerns for the leading global supplier of innovative wafer fabrication equipment.
LRCX Trading Below 50-Day SMA
Image Source: Zacks Investment Research
Nevertheless, Lam Research is benefiting from its strong positioning in the semiconductor industry, which is witnessing a solid rebound this year. Continuous deal wins and an improving demand-supply environment for memory chips are tailwinds.
The company’s strength in deposition and etch, core competencies in areas such as nanoscale applications enablement, chemistry, plasma and fluidics, and advanced systems engineering are major positives.
Given both risks and rewards, the question that arises is whether Lam Research will be able to sustain its strong rally and growth in the future.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
AI-Centric Prospects & Innovation Drive Long-Term Growth
Lam Research stands strongly to benefit from the ongoing recovery in the semiconductor industry. Improving memory spending on the back of the growing proliferation of AI and machine learning, as well as Generative AI, is the prime driver for the company.
Increasing AI's transformative use cases in both consumer and enterprise markets require significant investment in semiconductor manufacturing capacity to address the rising demand for advanced compute, memory and storage. Lam Research is well-positioned to capitalize on this on the back of its strength in wafer fabrication equipment.
AI's impacts on storage represent a strong growth opportunity for the company’s NAND business as advanced AI applications need faster, more power-efficient and higher-density NAND storage.
LRCX’s growing investments in expanding semiconductor fabrication capabilities, research and development activities, and Semiverse solutions are noteworthy.
Lam Research’s strong customer-centric lab investments in Korea, Taiwan and the United States to accelerate wins in both DRAM and foundry/logic advanced packaging are positives.
With Semiverse solutions’ digital twin capabilities, Lam Research optimizes multi-dimensional etch and deposition process recipes faster, and reduces the time and cost of technology development.
In deposition, the company is leading the transition from tungsten to molybdenum to improve device access time and reduce stack height per storage cell.
It leverages a high aspect ratio cryogenic etch to boost the productivity of memory hole formation. Its approach to 1,000 cryogenic etch chambers in its high-volume manufacturing installed base is a plus.
With Semiverse simulation tools, LRCX has accelerated innovation in NAND high aspect ratio memory hole etch production.
The company’s SABRE 3D and Syndion tools, which feature strong plating and etch capabilities, and deliver industry-leading throughput and productivity, are ideal for AI servers using high bandwidth memory.
Lam Research’s tools also enable foundry logic inflections, on the back of which it is gaining strong customer momentum.
Conclusion
The proliferation of AI, the global push for localized chip manufacturing capacity, and the ubiquity of semiconductors in new consumer and commercial products represent solid long-term growth opportunities for Lam Research. As AI drives a greater need for faster and more power-efficient devices, the company’s accelerating product innovation bodes well.
With the gradual improvement in memory spending, Lam Research expects NAND to benefit from technology upgrades, and DRAM to benefit from node conversions and capacity additions in high bandwidth memory this year. Meanwhile, its leading-edge investments are expected to benefit the foundry/logic category. All these are expected to drive its top-line growth in the long run.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $17.14 billion, indicating year-over-year growth of 15.5%.
However, escalating tensions between the United States and China due to the imposition of export curbs on China’s chip companies by the U.S. Department of Commerce have been major headwinds.
Although there has been a modest recovery in the memory category, sluggish wafer fabrication equipment spending remains concerning for Lam’s prospects.
Moreover, in the booming AI era, the company faces stiff competition from peers like Applied Materials (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) , which do not bode well for its market position.
The Zacks Consensus Estimate for LRCX’s fiscal 2025 earnings stands at $35.25 per share, indicating year-over-year growth of 18.8%. The estimate has been revised downward by 0.1% over the past seven days.
Image Source: Zacks Investment Research
Lam Research’s Value Style Score of D also suggests a stretched valuation at this moment.
Risk-averse investors should wait for a better entry point, given the uncertainties surrounding the company's growth prospects and the competitive pressure it faces.
Currently, Lam Research carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.