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Lam Research’s (LRCX) Price Target Raised Over 6% by Needham

Zacks

Lam Research Corporation’s LRCX price target was recently increased by more than 6% to $175 from $165 by investment firm Needham & Company. Additionally, analysts maintained the rating on the stock to Buy.

Coming to share price performance, the stock has outperformed the Zacks Semiconductor Equipment Wafer Fabrication industry in the last one year. It has returned 75.8% compared with the industry’s gain of 56.8%.

Why the Hike?


Y. Edwin Mok, an analyst at Needham & Company, remains optimistic about Lam’s increasing market dominance and growth prospects in two of the fastest growing segments in wafer fab equipments (WFE) – etch and deposition.

Mok is positive about Lam’s market growth in the second half of calendar year 2017 and beyond, driven by a strengthening WFE market.

As per Technavio’s market research report, the global WFE market is expected to grow steadily at a CAGR of around 4% by 2020. The recent increase in the sale of consumer electronic devices, such as smartphones, hybrid PCs, wearables, and video game consoles, is likely to augment growth in the semiconductor market, which in turn will impel growth in the wafer fab equipment market.

Anticipating strong growth in the wafer fab equipment market in the coming years, Lam Research and other players in the semiconductor space including Applied Materials AMAT are poised to benefit from it.

Mok said, "Lam is benefiting from artificial intelligence systems in data centers, which are big users of DRAM and Nand memory chips. Lam has a robust business selling equipment to memory-chip makers”.

Since storage is the starting point of this digital economy, there is huge demand for memory chips, particularly the more efficient variety. This has led to innovation in the form of 3D NAND. Lam’s products address the high aspect ratio challenges of advanced memory applications and position it well to capitalize on the growth opportunity that is likely to unfold in the coming years.

Recent Results & Looking Ahead

Lam Research delivered strong third-quarter 2017 results, wherein adjusted earnings of $2.80 per share surpassed the Zacks Consensus Estimate by 26 cents. Also, revenues of $2.15 billion were above the Zacks Consensus Estimate of $2.125 billion.

Lam Research issued decent fourth-quarter fiscal 2017 guidance. The company expects revenues of approximately $2.3 billion (+/- $100 million). Also, management expects non-GAAP earnings per share of $3 (+/- 12 cents). The Zacks Consensus Estimate for the upcoming quarter is pegged at $3.02.

Conclusion

Lam Research is a leading global provider of innovative wafer fabrication equipment and services to the semiconductor industry.

The company’s various initiatives such as product enhancements and solid execution are a few catalysts driving the stock. The company continues to witness strong success in areas of device architecture, process flow and technology inflections. Also, the company has been improving on the WFE market share significantly and expects to continue making gains.

Zacks Rank and Stocks to Consider

Lam Research carries a Zacks Rank #1 (Strong Buy). Some other favorably placed stocks in the broader technology sector include KLA-Tencor KLAC and Applied Materials AMAT, each sporting a Zacks Rank #1, while Advanced Energy Industries, Inc. AEIS, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

KLA-Tencor delivered a positive earnings surprise of 11.55%, on average, in the last four quarters.

Applied Materials delivered a positive earnings surprise of 3.35%, on average, in the trailing four quarters.

Advanced Energy Industries, Inc. delivered a positive earnings surprise of 10.46%, on average, in the trailing four quarters.

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