Valens Research Weekly Equity Idea Highlight for April 25, 2018 – Lam Research Corporation
This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
The recent sell off for LRCX is an overreaction, considering the company’s strong execution, macro tailwinds, and building management confidence about their outlook
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 13% 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.