LRCX - Embedded Expectations Analysis - 2021 06 10
Lam Research Corporation (LRCX:USA) currently trades at a recent high relative to UAFRS-based (Uniform) earnings, with an 18.2x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about foundry revenue growth, the sustainability of semiconductor demand, and their Customer Support Business Group (CSBG) segmentSpecifically, management may lack confidence in their ability to sustain foundry revenue growth, meet their WFE growth objectives, and capitalize on wearable technology and multi-stack scaling opportunities. Moreover, they may be overstating the growth potential of their Customer Support Business Group (CSBG) segment, and they may have concerns about their conversion investments as well as the sustainability of semiconductor demand, particularly in China. Furthermore, management may lack confidence in their ability to meet their operating income targets, improve their upgrades business, and capitalize on increases in the complexity of customer needs through new technology investments. They may also lack confidence in their ability to bring DRAM capacity online, and they may have concerns about their convertible bond redemptions and elevated logistics costs. Finally,
management may be concerned about the sustainability of large new contract wins
and share repurchase activity
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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