Bull Of The Day: LAM Research (LRCX)
LAM Research (LRCX) is on the ground floor of hardware innovation and is a critical component of the 4th industrial revolution, which is only beginning to heat up. Lam is a leading supplier of etching, deposition, and cleaning equipment for the semiconductor industry.
Lam knocked its June quarter earnings out of the park last week and analysts have been continuing to raise price targets and EPS estimates pushing LRCX into a Zacks Rank #1 (Strong Buy)
This enterprise is focused on driving innovation to produce the most cutting-edge integrated circuits, with a focus on sustainability. Lam is the market share leader of the niche etching and deposition markets for digital chip production and innovation.
Lam drives its topline in 3 semiconductor markets: memory, foundry, and logic/integrated device manufacturing.
The company customers include the largest and most trusted semiconductor businesses like Samsung (SSNLF) and Taiwan Semiconductor Manufacturer (TSM). Each of which is driving the next wave of digitalization. With 5 years of digitalization being seen in the last 5 months, these businesses' swelling demand is just beginning to proliferate.
Lam is well-positioning to take off from the impending 4th Industrial Revolution, which has just been catapulted forward by the COVID-crisis.
In the enterprise's quarterly report last week, CEO Tim Archer, exemplified his optimism about the future of the business:
"Lam delivered strong financial results in the June quarter despite tremendous global health, macroeconomic, and geopolitical uncertainty. This is a clear demonstration of our Company's ability to adapt and execute in a period of unprecedented challenges. With an outlook for continued industry growth, we are in an excellent position to outperform as our investments in disruptive innovation and differentiated customer support gain momentum."
Lam was also able to create a $25 million COVID-19 Relief Fund for employees and its communities, further developing its social impact. This illustrated that the business had the liquidity to meet growing demand and provide funding to support this world-changing pandemic, further illuminating its humanity improving vision.
Analysts are anticipating massive top and bottom-line growth for its fiscal year ahead (ending in June of 2021), after reporting exceeding robust financials for fiscal 2020 last week, despite the short-term supply chain and logistic issues related to COVID-19. Fiscal 2021 (ending June 2021) is anticipated to be a big year for Lam with analysts' estimating double-digit sales and earnings growth.
The firm is substantially exposed to Asia, with over 80% of its sales coming from China, Korea, Taiwan, and Japan. This creates some geopolitical risk, but the electronic markets in these regions are exploding, positioning LAM Research to ride this growth wave.
Semiconductors are cyclical by nature, but the 5G revolution and a resurgence in hyperscale computing are pushing these stocks to the stratosphere. LRCX is riding all-time highs, and the rally still looks strong. Many analysts have increased their price targets
LAM Research has a remarkably healthy balance sheet with $7 billion in cash & equivalents on hand (increasing $1.4 billion from the prior quarter), which more than doubles its current liabilities. This robust liquidity combined with its consistent cash-flows gives the firm a sizable amount of financial elasticity for internal and external growth.
There are some correction related risks with LRCX at its relatively frothy valuations, but if you can stomach potential short-term volatility, I would not hesitate to pull the trigger on this long-term semiconductor winner.
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