LRCX: Lam Research Further Validates Our Thesis

By William Trent, CFA of Stock Market Beat

Our readers know we have been anticipating a down cycle in semiconductors for some time. In fact, last June we wrote:

After denial comes anger. We think that means cancellation of semiconductor equipment orders. Then bargaining (price cuts.) Finally there is depression (of stock prices) followed by acceptance. We’ll be buyers at about stage four.

Which brings us to this news: 2-Lam profit rises but stock falls on outlook | Reuters.com

Lam Research Corp. (LRCX) posted a higher quarterly profit on Wednesday, but its stock fell 6 percent after the supplier of tools for making microchips gave an earnings forecast that was lower than Wall Street expected.Lam, which benefited last year from booming demand for memory chips, said that shipments for its third fiscal quarter ending in March would be hit by requests for delayed delivery by some customers.

The company elaborated on this in their conference call:

We’ve got a logic customer, who has fundamentally rethought their plans that had expected to take delivery in March and has now pushed that actually into the September and December quarters. And then the foundries, which have been positioning three or four months ago, about winding March deliveries have decided that they want to push most of those deliveries into June, a couple of the foundries have split their deliveries into the June quarter and the September quarters.

So at least we are fully into the anger stage, which happens to be coinciding pretty well with Intel’s (INTC) bargaining. While the second stage took longer than we anticipated to materialize, the third stage is coming in right on schedule. We’re hopeful that depression comes along soon so we can be more accepting.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; FedEx (FDX) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Starbucks (SBUX) call options; Landstar (LSTR) put options; Ceradyne (CRDN) put options; Dell (DELL) put options; Plantronics (PLT) put options;

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