More than 3 times higher than its lowest Covid level, could Lam Research stock exceed $ 700?

Up nearly 3.5 times from its March 2020 low, at the current price of $ 637 per share, we believe Lam Research Corporation shares (NASDAQ: LRCX) has further upside potential. Lam Research, a semiconductor processing equipment maker, saw its stock drop from $ 187 to $ 637 from its March 2020 low, far more than the S&P which rose more than 85% from its March 2020 low. in its hollow. In addition, the stock is up almost 90% from where it was before the pandemic. However, we believe Lam Research stock could rise nearly 10% to new highs above $ 700, due to expectations of continued growth in demand and strong third quarter 2021 results. Our chart on board What factors have caused the Lam research stock to change 368% between 2018 and now? has the underlying numbers behind our thinking.

The rise in Lam Research stock since late 2018 came despite a 9% drop in revenue, from $ 11.1 billion in fiscal 2018 to $ 10 billion in fiscal 2020 (the Lam’s exercise ends in June). Net margins fell from 21.5% to 22.4% over this period, and combined with a 10% decline in the number of shares outstanding, EPS (earnings per share) increased 6% from $ 14.73 to $ 15.55 over this period.

Additionally, Lam’s P / E (price / earnings) multiple increased from 9x in 2018 to 30x by the end of 2020, and has since risen to 41x currently. We believe that the company’s P / E ratio has the potential to rise further in the near term due to expectations of continued growth in demand and a shareholder-friendly return policy, thus pushing the share price higher. the action.

Where is the stock headed?

The global spread of the coronavirus and the resulting lockdowns affected demand for semiconductors in early 2020, but things have improved since then. Demand for Lam’s semiconductor processing equipment has increased, as evidenced by the company’s profits in the third quarter of 2021, where revenues increased to $ 3.85 billion from $ 2.5 billion for the same period last year. Operating expenses increased at a slower pace than revenue growth, which led to an increase in operating margins from 27.7% to 31.1%. Combined with a roughly unchanged effective tax rate, EPS fell from $ 3.96 to $ 7.51 during this period.

In addition, with the lifting of bottlenecks and the continued and steady growth in demand for semiconductor equipment and integrated circuits from various industries, we believe that the company’s revenue should still benefit in the medium term. In addition, if the company is able to continue to control its spending in the future, an increase in investor expectations could increase the company’s P / E multiple. We believe Lam Research stock can rise at least 10% from current levels, reaching new highs above $ 700.

While Lam Research’s stock may move higher, it helps to know how its peers stack up. Comparison of Lam Research actions with peers summarizes how Lam Research compares to its peers on the metrics that matter. You can find other useful comparisons at Peer comparisons.

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