On Thursday, Mizuho maintained its positive stance on Lam Research Corporation (NASDAQ:LRCX) shares, increasing the price target to $960 from $935 while keeping a Buy rating.
The adjustment follows Lam Research's recent financial report for the March quarter, which showed revenues are expected to remain roughly flat quarter-over-quarter. The company's gross margin is projected at approximately 47.5%, slightly above the consensus of 47.2%, despite a predicted decline of around 120 basis points from the previous quarter.
The firm highlighted several factors contributing to Lam Research's outlook. Notably, the anticipated worldwide wafer fabrication equipment (WFE) spending for calendar year 2024 is now expected to be in the low-to-mid $90 billion range, marking an increase of about 10-15% year-over-year, revised from earlier projections of 6-7%. This adjustment reflects a stronger than previously anticipated market environment.
Demand from domestic China, particularly in lithography and legacy nodes, is reported to be a driving force, although it is expected to be more pronounced in the first half of the year.
Additionally, the demand for DRAM, which has surged by 151% year-over-year, is being propelled by the need for AI high-bandwidth memory (HBM). This segment is estimated to grow at a 65% compound annual growth rate (CAGR) from 2023 to 2026.
Looking ahead, Lam Research foresees a more robust recovery in the NAND sector by 2025, bolstered by increasing AI-related demand. Furthermore, the company anticipates growth in Foundry/Logic sectors due to the transition to gate-all-around (GAA) technology, which requires selective etch and atomic layer deposition (ALD) processes.
Mizuho's revised price target reflects an optimistic view of Lam Research's prospects, citing an expected benefit from positive memory pricing for the remainder of calendar year 2024 and strong spending on DRAM HBM. The firm's updated estimates and raised price target suggest confidence in Lam Research's performance and market position.
InvestingPro Insights
With Lam Research Corporation (NASDAQ:LRCX) in focus, recent data from InvestingPro provides a nuanced picture of the company's financial health and market performance. The company boasts a robust market capitalization of $116.01 billion, indicating its significant presence in the industry. Despite analysts anticipating a sales decline in the current year, Lam Research has a history of resilience, having raised its dividend for 10 consecutive years, a testament to its commitment to shareholder returns. The company's P/E ratio stands at a high 34.32, suggesting that the market may have high expectations for its future earnings growth.
InvestingPro Tips highlight that Lam Research is a prominent player in the Semiconductors & Semiconductor Equipment industry, and while it is trading at a high earnings multiple, its liquid assets exceed short-term obligations, showcasing a solid balance sheet. The company's stock price movements have shown volatility, with a significant 52.43% price uptick over the last six months, yet a more recent 1-month total return of -8.91%. This volatility may present opportunities for investors with an appetite for risk.
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