LRCX – Although management’s concerns about growth, China, and DRAM suggest the potential for near-term headwinds, market expectations are too bearish, suggesting longer-term upside remains warranted

• Lam Research Corporation (LRCX:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 15.9x Uniform P/E, implying bearish expectations for the firm. Although management appears concerned about CSBG growth, China demand, and DRAM customer spend, market expectations are overly bearish, suggesting longer-term upside remains warranted
• Specifically, management may lack confidence in their ability to sustain Customer Support Business Group (CSBG) growth, remote support engagement, and days sales outstanding improvements. In addition, they may have concerns about their liquidity position, rising freight costs, and their customers’ ability to ramp DRAM and NAND spending. Moreover, management may lack confidence in their ability to continue tapping into China’s growing demand, grow productivity offering revenues 25% this year, and reduce node costs. Furthermore, they may be exaggerating their commitment to generating free cash flow and their ability to continue executing
• Although management’s concerns about CSBG growth, China demand, and DRAM customer spend suggest the potential for near-term headwinds, market expectations remain far too bearish given the firm’s long-term industry tailwinds and strong corporate performance, suggesting longer-term outperformance remains warranted for LRCX