Nomura Downgrades Lam Research To Neutral, Wants Clarity On KLAC Acquisition

Nomura downgraded Lam Research Corporation LRCX to Neutral as it awaits clarity on the acquisition of KLA-Tencor Corp KLAC, which would broaden Lam Research's end market exposure and increase margins, potentially resulting in multiple expansion.

However, Lam Research issued a press release extending the timeline for its merger with KLA-Tencor after receiving a request for more information from the Department of Justice. The company also disclosed that they still need approval from Korea, Japan and China.

"We find this concerning considering management's track record of managing quarterly earnings expectations. Risk/reward is not compelling, as such, we believe investors should move to the sidelines until there is certainty on the KLAC acquisition," analyst Romit Shah wrote in a note.

Shah also cut the target price on Lam Research shares by $10 to $85, while expecting FY16 EPS at $6.45 and FY17 EPS at $6.80.

Shares of Lam Research closed Wednesday at $89.11, down 4.48 percent.

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Posted In: Analyst ColorNewsDowngradesPrice TargetM&AAnalyst RatingsNomuraRomit Shah
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