This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.
While markets have grown impatient with LRCX, strong corporate execution, growing management confidence, and long-term macro tailwinds spell opportunity coming
Current market expectations for LRCX are overly pessimistic. Markets expect UAFRS-based (Uniform) ROA to decline dramatically from current 30%+ levels, where it appears to be stabilizing to 10% 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. The market also does not appear to recognize that they are currently in a supercycle for demand for storage chips, which are made using the equipment that LRCX provides, potentially offering 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.