Workflow
This Semiconductor Stock Is Skyrocketing, and It's Incredibly Cheap Right Now
LRCXLam Research(LRCX) The Motley Fool·2025-02-20 14:03

Core Viewpoint - Lam Research has shown strong performance in the stock market in 2025, with a year-to-date share price increase of 22% as of February 19, driven by positive quarterly results and outlook [1][2] Financial Performance - In the fiscal quarter ending December 29, Lam's revenue rose 16% year over year to 4.4billion,whilenetincomegrew284.4 billion, while net income grew 28% [3] - The company anticipates revenue of 4.65 billion for the current quarter, representing a 20% year-over-year increase, with a similar 28% growth in net income [7] Market Demand and Growth Drivers - The memory market is a significant growth area for Lam, with 1billioninrevenuefromgate−all−around(GAA)andadvancedpackagingtechnologies,expectedtotriplethisyear[4]−Increasedcapitalinvestmentsbymemorymanufacturers,suchasMicronTechnology′sprojected731 billion in revenue from gate-all-around (GAA) and advanced packaging technologies, expected to triple this year [4] - Increased capital investments by memory manufacturers, such as Micron Technology's projected 73% capex increase, are expected to benefit Lam, which derives half of its revenue from memory manufacturing equipment [5] Industry Outlook - The semiconductor equipment spending environment is projected to improve, with SEMI forecasting a 6.8% increase in equipment spending in 2025, followed by a 14% increase in 2026 [6] - Major foundries and tech companies are planning to boost capital spending to support AI infrastructure development [6] Earnings Growth Potential - Analysts forecast a 23% increase in Lam's earnings per share to 3.73 for the current fiscal year, with expectations of a dip in fiscal 2026 followed by a rebound in fiscal 2027 [8] - If Lam achieves 4.80pershareinearningsinthecomingyearsandtradesat28timesearnings,thestockpricecouldriseto4.80 per share in earnings in the coming years and trades at 28 times earnings, the stock price could rise to 134, representing a 52% increase from current levels [9][10] Valuation - Lam Research is currently trading at approximately 27 times trailing earnings and close to 24 times forward earnings, indicating an attractive valuation for potential investors [10]