This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Even after LRCX’s dramatic rise over the past year, market expectations appear entirely too pessimistic, considering the company’s execution and macro tailwinds
Current market expectations for LRCX are overly pessimistic. Markets expect UAFRS-based (Uniform) ROA to decline from current 30%+ levels, where it appears to be stabilizing, dramatically to 12% over the next few years. The market appears to not recognize the fact that their customer base has consolidated, which has changed the dynamics of demand for the business, and also the market is currently in a supercycle for demand for storage chips which they provide the equipment to make, which can offer the company a prolonged positive cycle. Considering these factors, the company likely has far stronger fundamentals for the next several years than the market recognizes.