Lam Research Poised for Much More Growth, Even After Earnings Pop

By Jon C. Ogg Published Apr 21, 2:15PM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Lam Research Corp. (NASDAQ: LRCX) has already risen handily after earnings. Now the semiconductor capital equipment player may still be poised for much higher gains in 2015 and into 2016. Credit Suisse is the most positive of all analysts covering the stock, so we wanted to see what the firm had to say after the shares popped up.

Credit Suisse’s Farhan Ahmad is the analyst covering the company, and his rating is Outperform, with a whopping $105 price target that was raised from $102 before the call. That is over $12.00 higher than the consensus analyst price target of $92.86 and $11.00 higher than the median price target of $104.00.

Now keep in mind that the $105 target is almost $28.00 more than the current share price of $78.15, and that is after Lam Research shares were up 8.6% after the earnings report.

Ahmad said that this was a solid beat against earnings and was a raise on guidance ahead. Earnings were 8% ahead of street estimates. Strong shipments imply that even with 10% to 15% decline in second-half shipments, Lam should beat street revenues and earnings estimates ahead. Ahmad further noted:

The company maintained 2015 WFE at $34 billion, noting that stronger 3D NAND and CMOS sensor spending is offsetting logic/Foundry cuts. Lam also indicated an uptick in 3D NAND capital spending, which we believe could potentially double Lam’s NAND revenues from about $1 billion a year in 2013-2014 to about $2 billion per year in 2016-2017. We continue to maintain Lam Research as our top pick and expect the company to outperform peers over next 3 years.

Exposure to growth segments of WFE, 3D NAND, multi-patterning and TSV are all drivers. Credit Suisse has now raised its revenue and earnings targets, from $5.46 billion and $5.45 per share to $5.77 billion and $5.78 per share for 2015, and from $5.9 billion and $6.40 per share to $6.5 billion and $7.00 per share for 2016.

Another boost was that gross margin was seven-tenths higher than its guidance of 44%. Credit Suisse noted that this margin upside was driven by better utilization levels due to higher shipments, even if operating expenses were marginally higher than expectations.

ALSO READ: What ARM and Rambus Have in Common

Lam Research showed with earnings that shipments were up 20% to $1.497 billion for the quarter. Its revenue of $1.393 billion was up 13%. Martin Anstice, Lam Research’s president and chief executive officer, said:

Lam’s March quarter results reached record levels further extending our outperformance trajectory. Our differentiated products and services are directly addressing the market driving technology inflections of multi-patterning, 3D device architecture and advanced packaging. Through ever closer collaboration with our customers we are partnering to solve their most critical challenges solidifying our growth opportunity.

Lam Research shares were up 8.6% at $78.20 in mid-afternoon trading on Tuesday. Its 52-week trading range is $51.99 to $85.80, and the market cap is $12.5 billion.

About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.