On Tuesday, Citi reiterated its Buy stock rating on Lam Research (NASDAQ:LRCX), maintaining a stock price target of $975.00. The firm's outlook is based on expectations of the company's March-quarter results, set to be announced after the market closes on Wednesday, April 24. Citi's projections for the March quarter are in line with the consensus, anticipating sales and earnings per share (EPS) to align with market expectations.
For the upcoming June quarter, Citi forecasts sales and EPS to increase by 2% and 1%, respectively, slightly above consensus. This outlook is underpinned by sustained demand in China and favorable gross margins.
While the consensus expects a decrease in system and services sales for the March quarter, Citi predicts a modest decline of 1% for both, compared to the Street's more significant system sales decline and an increase in services sales.
Looking ahead to the June quarter, Citi projects a 2% rise in system sales and a 5% increase in services sales, contrasting with the Street's more optimistic system sales forecast and a predicted drop in services sales.
The firm's analysis suggests that investors are keenly anticipating the timing of the NAND Wafer Fabrication Equipment (WFE) recovery, given Lam Research's significant market share in NAND production equipment.
Citi expects a NAND WFE recovery to commence by the end of the year, with spending projected to double the following year. This recovery is seen as driven by the growing demand for high-density Solid-State Drives (SSDs) used in Artificial Intelligence (AI) storage applications, such as training.
The firm posits that the semiconductor capital equipment sector is in a Phase 2 recovery and anticipates potential upside to the Street's 2025 expectations of an 11% year-over-year increase in wafer fab equipment, amounting to approximately $97 billion. Citi's own estimate stands at $110 billion, marking a 29% surge.
InvestingPro Insights
As Citi maintains a bullish stance on Lam Research (NASDAQ:LRCX) with a 'Buy' rating and a high price target, real-time data from InvestingPro provides a comprehensive picture of the company's financial health and market performance. With a market capitalization of $116.56 billion and a P/E ratio of 34.23, LRCX reflects a significant presence in the market.
Despite recent volatility, with a one-week price total return of -9.88%, the company has demonstrated resilience over the longer term, boasting a one-year price total return of 69.64%. This aligns with InvestingPro Tips highlighting the company's decade-long dividend increase streak and its status as a prominent player in its industry.
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