Goldman Sachs Reinstates Neutral On Lam Research, Bullish On Long Term

Goldman Sachs has reinstated coverage of Lam Research Corporation LRCX with a Neutral rating and price target of $104 following its termination of merger with KLA-Tencor Corp KLAC.

“We expect minimal business disruption from the merger termination, as the lack of product overlap between Lam and KLA (per management comments) enabled Lam to stay focused on product development and corporate strategy as a stand-alone company,” analyst Toshiya Hari wrote in a note.

The analyst believes Lam Research will continue to outperform industry peers in the wafer fab equipment (WFE) market and is poised to grow in the 3D NAND market.

Hari raised his CY16/17 revenue estimates by 3/5 percent and EPS estimates to $7.02/$8.01 from $6.50/$7.31, respectively, to reflect on-going strength in equipment orders and a potential resumption in share buybacks.

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Hari, however, remains sidelines on the stock due to the balanced risk/reward as the stock is trading at 12x GS NTM PE (in line with five-year averages) and shipments at record levels.

“While balanced risk-return keeps us sidelined on the stock, we continue to have a favorable view on Lam’s product positioning and management’s execution and view the company as a long-term leader in semi cap alongside Applied Materials, Inc. AMAT,” Hari added.

The analyst would become constructive on the stock in the event of “better entry point” and acceleration in share gains.

At last check, Lam Research was down 0.55 percent at $98.43.

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