Thursday, Susquehanna announced a revised price target for Lam Research (NASDAQ:LRCX), lowering it to $850 from $880 while retaining a Neutral rating on the stock. The firm's analyst pointed out that Lam Research's recent report and outlook met their expectations, which had predicted a dip in CSBG revenues, with China's performance remaining robust.
Lam Research's lack of visibility into the year 2025 was noted, yet the analyst acknowledged the increase in the 2024 Wafer Fabrication Equipment (WFE) spending forecast, which was raised from the range of $85-$88 billion to $92-$95 billion. This adjustment is attributed to a rise in lithography shipments to China, which could indicate potential growth in the Chinese market for 2025 following a strong performance in 2024.
The analyst also suggested that a key indicator of future growth would be Lam Research's decision to accumulate inventory in anticipation of heightened system shipments in 2025. However, such an inventory buildup is not expected to be evident until the latter part of the summer or early autumn. As a result, the analyst believes that the earnings per share (EPS) potential for 2025 is currently limited to $45.
In summary, while the price target for Lam Research has been reduced, Susquehanna maintains a neutral stance on the stock. The firm's perspective is based on current market conditions and projections for the company's performance in the upcoming year.
InvestingPro Insights
InvestingPro data offers a deeper dive into the financial health and market performance of Lam Research (NASDAQ:LRCX). With a market capitalization of $116.01 billion, the company stands as a prominent player in the Semiconductors & Semiconductor Equipment industry. Despite analysts anticipating a sales decline in the current year, Lam Research has a record of raising its dividend for 10 consecutive years, showcasing a commitment to shareholder returns. The company's dividend yield is currently at 0.9%, with a notable dividend growth of 15.94% over the last twelve months as of Q1 2023.
While the company's revenue has seen a significant contraction of 24.48% over the same period, Lam Research's liquid assets exceed its short-term obligations, indicating a healthy liquidity position. This is further supported by a strong return on assets of 19.24%. However, investors should note that Lam Research is trading at high valuation multiples, with a Price / Book ratio of 14.46 as of Q1 2023, which may affect the stock's attractiveness from a valuation standpoint.
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