LRCX - Embedded Expectations Analysis - 2018 08 17
Lam Research Corporation (LRCX:USA) currently trades far below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 9.0x Uniform P/E. At these levels, the market has muted expectations for the firm, and while management has concerns about near term market softening, share repurchases, and expansion, potential market tailwinds and the firm's leadership position in the space suggest longer-term upside remains warrantedSpecifically, management may be concerned about near term softening in customer equipment spending and may lack confidence in their share repurchase strategy. Additionally, management may be exaggerating their confidence in a value proposition based on memory strength and in their ability to broaden their product offerings. Furthermore, they may lack confidence in their September expansion plans and in their ability to make 3D the primary output technology of nonvolatile memory. However, given industry tailwinds, and bullish analyst expectations, it is likely that LRCX can outperform muted market expectations in the long-run, indicating that equity upside is warranted
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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