LRCX - Lam Research: More Wafer Fab Equipment Spend For FY2025 Maintaining Buy

2024-05-17 23:17:58 ET

Summary

• Lam Research reported its third quarter of FY2024. Management's raised wafer fab equipment market for 2024 confirms my positive outlook on the stock.
• I think the memory market bounce back will support more outperformance for Lam in FY2025 with NAND-related sales expected to grow in particular.
• Also, I'm not worried about the sustainability of the higher shipments to China because I think the global semi recovery will fill whatever gap the sales to China leave.
• I share my thoughts on Lam here, and why I think it has more upside in 2024.

Investment Thesis

I wrote on Lam Research ( LRCX ) in early April, ahead of management reporting the third quarter of FY2024 earning results. The investment thesis I proposed then played out this quarter; I had noted , “I expect Lam to continue to outperform as the industry's wafer fabrication equipment spend, or WFE increases, to keep up with the appetite for advanced tech to keep up with the AI boom.” And this quarter, management revised its 2024 wafer fab equipment market from $85 billion-$89 billion to $91 billion to $95 billion. The company also reported revenue growth of 1% sequentially, lower than I’d hoped for, to $3.79 billion, but nonetheless beat consensus estimates at $3.72 billion. In my opinion, this quarter’s outperformance was supported by memory recovery, which translates into higher better overall Wafer fab equipment or WFE spend and benefits Lam’s NAND and DRAM-related system sales. I continue to be positive about Lam; management continues to be guarded in its outlook for next quarter, leading me to expect another beat next quarter as the WFE spend (outside of China) recovers....

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