Check Out Goldman Sachs' Buy-The-Weakness Call On Lam Research

Shares of Lam Research Corporation LRCX were trading higher by more than 1 percent on Monday after Goldman Sachs analyst James Covello argued that investors should use the recent relative (and absolute) weakness in Lam Research to build positions in the stock.

"There has been a steady stream of cautious news from the semi sector over the past few weeks (formal negative preannouncements from Intel Corporation INTC and SanDisk Corporation SNDK, a guide down by Micron Technology, Inc. MU and cautious commentary from Taiwan Semiconductor Mfg. Co. Ltd. TSM)," Covello wrote.

"While the semi stocks have been generally immune to the weak fundamental announcements, the negative news has had a pronounced effect on Semi Equipment stocks and Lam Research in particular (semis down 4 percent versus Semi Equipment down 6 percent on average and Lam Research down 10 percent since Taiwan Semiconductor's comments on April 25)."

Covello added that during the same timeframe as the negative semi news flow, there have been several positive developments directly impacting Lam Research.

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Specifically, Tokyo Electron positively preannounced driven by strength in Semiconductor Equipment provider sales. Also, Disco (a Japanese Semi Equipment provider firm that sells different equipment to Lam Research's top customers) posted an upside earnings surprise.

Covello also noted that Intel, Micron and Samsung Electronics Co Ltd released news reports suggesting 3D NAND orders should increase in the second half of 2015.

As such, Covello argued that the market is worried about the sustainability in memory spending, which "disproportionally" impacts Lam Research given its high share with memory customers. However, the analyst added that recent developments should give investors incremental comfort and that NAND players will increase orders to the Semiconductor Equipment providers in the second half of 2015, with Lam Research being the biggest beneficiary.

Shares of Lam Research remain Conviction-Listed and Buy rated with an unchanged $91 price target.