We came across a bullish thesis on Lam Research Corporation (LRCX) on Long-Term Pick’s Substack by Dan. In this article, we will summarize the bulls’ thesis on LRCX. LRCX Technologies, Inc. share was trading at $784.08 as of Sept 23rd. LRCX’s trailing and forward P/E were 27.04 and 21.69 according to Yahoo Finance.
High angle view of a semiconductor chip against an array of electronics components.
Lam Research Corporation (LRCX) established in 1980 specializes in the deposition and etch processes enabling it to be a leading provider of wafer fabrication equipment. It serves big names such as Samsung, TSMC, and Micron in the semiconductor industry. Lam Research has captured a dominant market share in both etch equipment and deposition equipment markets.
Very few big players are there in the wafer fabrication industry in which LRCX operates. LRCX holds a dominant market share in etch equipment (~33%) and is second in deposition (~20%). Lam Research (LRCX) operates in several key areas of semiconductor manufacturing. The core business segments in which it operates are the Etch segment uses advanced technology to precisely remove materials from wafers, essential for creating integrated circuits. The Deposition segment focuses on layering materials on wafers using specialized processes. The Cleaning segment ensures high-quality products by removing contaminants from wafers. The Service and Support segment provides maintenance and upgrades, fostering customer loyalty and recurring revenue. Lastly, the Emerging Technologies segment explores innovations like machine learning and automation to enhance manufacturing efficiency for future applications.
LRCX has demonstrated strong financial performance and efficiency in different aspects of a company’s operations which can be seen from its high ROIC, ROA, and ROE. The company also boasts a strong balance sheet with robust cash flow-generating capabilities. LRCX also earned revenue of $3.87 billion and EPS of $8.14 beating the guidance provided. With a strong position in the market, LRCX is expected to generate revenues of $22.37 Billion by 2027.
Investing in Lam Research (LRCX) presents a compelling opportunity because the company is a leader in the semiconductor equipment industry, which is tough for new competitors to enter. They have strong expertise in making semiconductor parts and good relationships with major clients, giving them a competitive edge. Lam Research invests heavily in research and development, keeping them ahead in the market. They also regularly buy back shares and increase dividends, showing their financial strength and efficiency. The company has loyal customers who find it hard to switch to other providers due to the integrated nature of Lam’s solutions. With a global presence, they offer localized support, boosting customer satisfaction. Looking forward, Lam Research is well-positioned to benefit from the growing demand for artificial intelligence, 5G technologies, and memory chips, with an expected potential upside of about 11.68%.
Lam Research Corporation is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held LRCX at the end of the second quarter which was 78 in the previous quarter. While we acknowledge the risk and potential of LRCX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LRCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.