Lam Research (NASDAQ:LRCX) gained 1.6% in pre-open trading Monday after Stifel upgraded the stock to ‘Buy’. Elsewhere, Mizuho Securities raised its price target on the stock.
Stifel analysts upgraded LRCX to Buy from Hold and lifted their price target to $725 from $505, saying DRAM might be the backdoor way to play the recovery off the bottom led by AI spending.
In a note on the semi cap equipment space today, analysts highlighted that listening to last week's TSMC/ASML earnings calls may lead to a more pragmatic view on the semiconductor capital spending recovery. However, visibility at the bottom/early stages of cycles is typically weak. While generative AI breakthroughs were expected to boost WFE (wafer fab equipment) spending, their immediate impact seems to be concentrated. However, high bandwidth memory (HBM) is an area deserving more attention as an under-appreciated piece of AI acceleration. Yet, specialized HBM DRAM is not abundant, and the increased demand for AI-driven GPU/TPU is not significantly driving foundry WFE, though it is affecting DRAM.
“We view Lam as a prime near-and-longer term beneficiary of HBM-driven DRAM growth, and off rock-bottom JunQ memory levels, see a path forward for Lam’s revenue trajectory to outperform consensus starting in calendar 2H,” the analysts commented.
“We believe Samsung is expanding HBM DRAM capacity in 3Q and expect this to provide an incremental boost to downtrodden levels of memory under-investment in 2Q,” the analysts added. “On a per capita basis, it’s well understand that Lam has the highest exposure to DRAM (memory averaged ~60% of Lam system revenue across the prior upcycle), which includes high market share of the conductor etch process that is needed to create the 1000s of TSVs (through silicon vias) that interconnect DRAM die together in an HBM stack.”
Analysts are modeling Lam revenue in the September and December quarters at $3.44B and $3.83B, respectively, and EPS at $5.99 and $7.11. This compares to the consensus at $3.30B/$3.51B and $5.54/$6.24, respectively.
Meanwhile, Mizuho analysts lifted their price target on LRCX to $680 from $520, citing potential FY24 WFE tailwinds in the memory space. “In WFE, we see 2H23E trends coming in muted but with potential for a better C24E as 1) memory pricing for DRAM/NAND is expected to bottom in 2H23E and could trend better into 2024E, supporting memory WFE capex expansion and specifically LRCX, and 2) after C23E WFE we estimate down 22% y/y, we believe C24E could be up 8% y/y (prior up 7% y/y) with stronger DRAM/ NAND WFE and stable Logic/Foundry, with stable lagging edge/ ICAPS and global capacity on-shoring, benefiting AMAT,” they commented.
LRCX is expected to report its earnings on Wednesday, July 26th after the market close.