February 2, 2018

LRCX – Although management sentiment suggests the potential for near-term downside, market expectations are still too bearish, suggesting longer-term upside remains warranted

    • Lam Research Corporation (LRCX:USA) currently trades near historically normal levels relative to UAFRS-based (Uniform) Earnings, but well below corporate averages, with a 10.5x Uniform P/E. At these levels, the market has overly bearish expectations, and, although negative management sentiment suggests near-term headwinds, this implies further upside would be warranted in the long-term
    • Specifically, management is concern about demand, industry trends, and growth imply that near-term equity upside may be limited. However, considering recent Uniform ROA trends and positive analyst sentiment, it is likely the firm can outperform bearish market expectations in the long-term, and in that scenario, upside would be warranted

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