Lam Research- Core name to own in a growth portfolio
​Lam reported March’17 qtr results with revenues ($2.15bn, +14% q/q) and shipments ($2.41bn, +25% q/q) which came at the top end of its guidance. Non-GAAP Gross Margin came in at 46.1% (-30bps q/q) with Non-GAAP Operating margin improving 90 bps sequentially to a record 26.9% on lower opex as a percentage of sales. Non-GAAP EPS of $2.80 was a clear beat to the street and our estimates. Overall memory shipments accounted for 73% of total with NAND shipments comprising 50% of total at $1.2bn which is a record for the company. Specifically, Lam saw strength in Korea where the company registered a 35% q/q increase given 3D NAND ramp at Samsung’s new fab (PK fab), as well as at Hynix. In addition, DRAM shipments improved 20% q/q to $555m as we believe the company benefited from capacity additions in Samsung’s Line 17 factory. Lam provided an upbeat June’17 qtr guidance with revenues of $2.3bn (cons. $2.1bn) and EPS of $3.00 (cons. $2.66) as memory shipment strength continues. With Lam expecting 2017 to be another solid year for WFE spending (we estimate $37bn) and guiding 2H17 shipments to be more balanced with 1H17 driven by 10nm and early 7nm foundry spend which should offset decline in memory shipments, we estimate overall CY17 shipments to be up 43% y/y to $9.5bn which is a record for the company. Raising PT to $157 (up from $130) based on 14x CY17 EPS of $11.25. Reiterate Buy
Lam Research is a supplier of wafer fabrication equipment and services to the semiconductor industry. The company designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company's customer base includes semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, dynamic random-access memory, and logic devices. The company's services include customer service, spares, improvement, and refurbishment of its deposition, etch, and clean products. The company sells its products and services to companies in the United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan.
Summit Insights Group LLC (SIG), founded by Srini Nandury in 2018, is a fundamentals-driven, technology-focused, equity research boutique. SIG analysts cover Semiconductors, Semicap Equipment, Enterprise & Application Software, and IT Hardware & Storage companies. The firm also provides insight into adjacent areas such as Mobile and Internet Technologies.
SIG provides deep, rigorous technology and financial analysis, unlike Wall Street analysis that is mainly driven by financial models. SIG principal analysts are known for their extensive industry experience, which we believe is essential to evaluate technology industry stocks. Each principal analyst has at least 5 years of hands-on industry experience prior to their tenure in equity analysis. SIG analysts are known for making non-consensus prescient stock calls.
SIG analysts follow more than 100 stocks regularly in the areas of Enterprise and Application Software, Storage, Networking, Security, Flash Memory, Big Data, Storage Networking, SSD and Processors. SIG analysts have access to the managements of both public and private companies to verify factual items from public comments or published statements, buttressing the integrity of our analysis. SIG analysts regularly attend industry conferences and visit startup companies to understand technology trends driving the industry. SIG is not a broker dealer, hence it does not have investment banking or trading conflicts. At SIG, we value integrity, our client interests and confidentiality above all else.
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