November 2, 2017

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 historical averages relative to UAFRS-based (Uniform) Earnings, with a 10.8x 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 concerns about industry growth, China, and operating leverage 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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