Technology Stocks

How Lam Research Corporation (NASDAQ:LRCX) Just Sucker Punched the Chip Bears

Lam Research Corporation (NASDAQ:LRCX) should basically just take a bow. Rarely do you see an earnings report that so readily serves crow to such a large contingent of the investment community. One of the mainstays of the market world over the past 3-6 months was “how do we deal with the end of the chip cycle and keep the IT bull moving?”

And then Lam reframed the situation on Tuesday afternoon. The company utterly surprised the market with a $0.14 beat on EPS. But, more importantly, it also guided fiscal Q2 (DecQ) revenues above expectations. This was even more surprising given expectations of weaker NAND and DRAM pricing, which were baked basically into the very center of the zeitgeist cake for the chip space. Whoops.

Lam Research Corporation (NASDAQ:LRCX), for a big picture perspective, trumpets itself as a company that designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits worldwide.

The company offers ALTUS systems to deposit conformal films for tungsten metallization applications; SABRE electrochemical deposition product for copper damascene manufacturing; SOLA ultraviolet thermal processing products for film treatment; SPEED gapfill high-density plasma chemical vapor deposition (CVD) products; Striker single-wafer atomic layer deposition (ALD) products; and VECTOR plasma-enhanced CVD ALD products.

It also provides Flex for dielectric etch applications; Kiyo for conductor etch applications; Syndion for through-silicon via etch applications; and Versys metal products for metal etch processes. In addition, the company offers Coronus bevel clean products to enhance die yield; and Da Vinci, DV-Prime, EOS, SP to address a range of wafer cleaning.

Further, it provides Metryx mass metrology systems for high aspect ratio etch, conformal and ALD/sidewall deposition, horizontal processing, film density monitoring, carbon mask open, and wafer cleaning/polymer removal applications; and legacy products.


In Chip We Trust?

As noted above, LRCX just put out its Q2 (SepQ) earnings and guidance, and the data was well above expectations and a clear surprise.

At this point, we will be looking at an open about 7% as the bell rings tomorrow morning. And that makes sense. As discussed, there was a ton of skepticism baked into this cake, and the data and guidance really fly in the face of the market’s discounting assumptions.

We also listened to the call and would note that this was probably the most significant note: “September quarter marks a near-term trough for business. While near-term forecasts are subject to change; remain optimistic on longer-term growth prospects that highlight during investor event back in March.”

In other words, not only was there a hard, quantitative guide higher for next quarter (and for “trends”), but there was also a kind of spiritual guide put out for the chip cycle faithful – a clarion call – that the cycle is juicing back up likely into next year.

This definitely flies in the face of conventional wisdom and may impact many other plays in the space tomorrow (MU, ENTG, MKSI, STX, WDC, etc).

Lam Research Corporation (NASDAQ:LRCX) managed to rope in revenues totaling $3.1B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 33.4%, as compared to year-ago data in comparable terms.

In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($4.9B against $3.2B).

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