Credit Suisse: Lam Research Faces Near-Term Pressures, But Long-Term Drivers Are Intact

While Lam Research Corporation (NASDAQ: LRCX) reported its fourth-quarter revenue and EPS ahead of expectations, its first-quarter guidance was disappointing on both fronts, according to Credit Suisse.

The Analyst

John Pitzer maintained an Outperform rating on Lam Research with an unchanged $278 price target. 

The Thesis

Although Lam Research’s memory segment is likely to experience a significant sequential decline in the first quarter, the impact should be offset by the foundry and logic sector, which is now weighted to the second half, Pitzer said in a Thursday note. (See his track record here.)  

The company reported fourth-quarter revenue and EPS at $2.36 billion and $3.62, respectively, above Street expectations of $2.35 billion and $3.40, respectively. 

The first-quarter revenue and EPS guidance was announced at $2.15 billion and $3, respectively. Both figures fell short of Street expectations of $2.28 billion and $3.22.

Lam said that memory performance was weak due to DRAM, while NAND was in-line. The company expects memory supply to fall short of demand exiting 2019, setting the stage for a recovery of this segment in 2020.

Credit Suisse reduced the EPS guidance for calendar 2019 and 2020 from $14.15 to $13.50 and from $16.80 to $16.50, respectively. 

“While F1Q Rev guide implies the cycle has not troughed, profitability remains significantly higher, … increasing capital intensity and a stronger Foundry/Logic limits significant downside.”

Price Action

Lam Research shares were trading higher by 0.84% at $210.37 at the time of publication Thursday. 

Related Links:

10 Biggest Price Target Changes For Thursday

24 Technology Stocks Moving In Wednesday's After-Market Session