Lam Research is the IBD Stock Of The Day as investors look beyond its weak near-term outlook to a possible improvement in semiconductor equipment sales in the second half of 2023. LRCX stock dipped on Friday.
The Fremont, Calif.-based company late Wednesday beat Wall Street's targets for its fiscal second quarter but guided below views for the current period. Still, LRCX stock rose 1.9% in the following regular trading session on Thursday.
Lam Research earned an adjusted $10.71 a share on sales of $5.28 billion in the December quarter. Wall Street was looking for earnings of $10.03 a share on sales of $5.1 billion. On a year-over-year basis, Lam earnings rose 26% while sales climbed 25%.
For the March quarter, Lam forecasts adjusted earnings of $6.50 a share on sales of $3.8 billion. That outlook was well below Wall Street's targets of $7.78 a share in adjusted earnings and $4.35 billion in sales. Lam's outlook would translate to year-over-year declines of 12% in earnings and 6% in sales.
LRCX Stock Nears Buy Point
In midday trades on the stock market today, LRCX stock fell 3% to 482.88.
Lam Research shares have formed a bottoming base with a buy point of 504.65. However, a move above its Thursday high of 498.66 could offer an early entry for aggressive investors.
Analysts said Lam's latest earnings report was an opportunity to clear the decks and reset expectations.
On a conference call with analysts Wednesday, Lam executives said customers, especially memory-chip makers, are being cautious with spending. In response, Lam announced plans to cut 1,300 jobs, or about 7% of its workforce. It also eliminated about 700 part-time and contract jobs.
"Given the decline in wafer fabrication equipment spending expected in calendar year 2023, we are taking proactive steps to lower our cost structure and drive efficiencies across our global footprint, while preserving critical R&D," Chief Executive Tim Archer said in a news release.
Wall Street Optimistic About Lam Research
Weakness in wafer fabrication equipment spending is now priced into LRCX stock, Mizuho Securities analyst Vijay Rakesh said in a note to clients. Lam is well positioned for a potential rebound in the chip gear market in the second half of the year, he said.
An improvement in the memory and logic chip markets in the back half of the year could be a tailwind for LRCX stock, he added.
Rakesh reiterated his buy rating on Lam Research stock and raised his price target to 525 from 500.
Jefferies analyst Mark Lipacis maintained his buy rating on LRCX stock and upped his price target to 565 from 525.
"Often the best time to make money owning semi stocks is when second derivatives inflect — said another way, when things go from 'really bad' to 'bad,' " Lipacis said in a note. "This is where we believe LRCX is now."
LRCX stock is on the IBD Tech Leaders stock list and the IBD Big Cap 20 list.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
