On Monday, UBS reasserted its Buy rating on Lam Research (NASDAQ:LRCX), with a steadfast stock price target of $1,130.00. The firm's outlook hinges on the upcoming fiscal third quarter results of 2024, which are anticipated to slightly exceed the midpoint of projections.
The guidance for future performance is contingent on the actions of the U.S. Department of Commerce regarding the addition of major Chinese customers to the Entity List.
The firm's analysis suggests that if Lam Research and other U.S. semiconductor processing equipment (SPE) suppliers continue to serve customers in China, such as CXMT, SwaySure, and SMIC, through the June quarter, the revenue guidance could remain relatively unchanged from the previous quarter.
This expectation is based on the fact that the NAND market has not yet shown signs of recovery, while the demand in China remains robust in anticipation of potential new restrictions.
Lam Research is expected to reemphasize the forecast of a second-half-year surge in 2024, with the following year projected to be particularly strong due to a rebound in memory spending. The services segment of Lam Research is predicted to sustain its stability in the short term and see an acceleration in the latter half of the year as NAND utilization begins to increase.
Moreover, the firm forecasts that Lam Research will expand its wafer fabrication equipment (WFE) market share by at least 200 basis points in approximately 2025.
In conclusion, UBS stands by its sole Buy rating for a U.S. SPE stock on Lam Research, reaffirming the $1,130 stock price target. The emphasis on the Chinese market and the expected growth in the services business underpin the firm's positive stance on Lam Research's stock performance.
InvestingPro Insights
As UBS maintains a bullish stance on Lam Research with a price target of $1,130, the InvestingPro platform offers additional context to the company's financial health and market position. With a market capitalization of $126.98 billion and a P/E ratio standing at 37.3, Lam Research is valued at a premium in the market.
This high earnings multiple may reflect the company's status as a prominent player in the Semiconductors & Semiconductor Equipment industry, as well as its history of raising its dividend for 10 consecutive years, signaling confidence in its financial stability.
InvestingPro Tips reveal that while Lam Research is trading near its 52-week high, analysts are anticipating a sales decline in the current year, with expectations of net income dropping as well.
Despite these challenges, the company's liquid assets exceed its short-term obligations, and it operates with a moderate level of debt, which may provide some cushion against market volatility. Notably, Lam Research has maintained dividend payments for 11 consecutive years, which could be a point of interest for income-focused investors.
For investors seeking a deeper dive into Lam Research's performance and potential, InvestingPro offers additional tips on the company's valuation and financial metrics. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, where you can access over 20 InvestingPro Tips for a more comprehensive investment strategy.
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