Still Time To Go Long On Lam Research
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You Can Benefit From Lam's Exposure To Memory
Jul. 13, 2015, 4:32 PM
- "When the company announced a confusing merger with Alcatel-Lucent ... we used the opportunity to exit with a healthy gain," writes David Einhorn in his Q2 letter, explaining Greenlight Capital's unloading of its Nokia (NYSE:NOK) position.
- Regarding his decision to exit EMC, Einhorn cites "the reduced odds of any favorable change to the corporate structure and increasing concerns about a lack of growth in the storage business." EMC is 4 months removed from formally stating it doesn't plan to spin off its 80% VMware stake.
- Regarding Marvell (NASDAQ:MRVL), a position held for years, Einhorn cites weak PC demand as a reason for exiting following a 15% compounded annual return. His disclosure comes on a day Marvell rose 5.4% thanks to a report of buyout interest from a Chinese investment firm.
- Echoing the bullish arguments he has made for rival Lam Research (NASDAQ:LRCX), Einhorn says he took a small position in Applied Materials (NASDAQ:AMAT) out of a belief AMAT's core etch/deposition equipment markets will outgrow the broader chip equipment industry "due to the increased use of 'multi-patterning' to produce chips at geometries below [20nm]." He predicts results will improve as management turns its attention from the abandoned Tokyo Electron merger towards "growth and cost savings opportunities." With Einhorn's help, AMAT rose 2.9% today.
- "It's a cyclical business and, regrettably, we missed the turn of the cycle," says Einhorn about Micron (NASDAQ:MU), Greenlight's biggest Q2 loser. However, he still thinks the DRAM industry is acting more rationally following consolidation, notes shares trade at "less than 12x annualized trough earnings and less than 5x prior peak earnings," and predicts future cycles will have higher peaks and troughs.
- Over the long run, Einhorn expects Micron ($19.1B market cap) to be worth more than Netflix (NFLX - $42.9B market cap), whose recent surge he considers quite unjustified. "In today's market, the best performing stocks are companies with exciting stories where accountability is in the distant future." He adds Season 3 of House of Cards "appeared to be scripted to compete with Ambien,"
- Worth noting: While Einhorn has a good track record going long, his short picks have been more hit-and-miss.
May 18, 2015, 4:39 PM
- Lam Research (NASDAQ:LRCX) declares $0.30/share quarterly dividend, 66.7% increase from prior dividend of $0.18.
- Forward yield 1.51%
- Payable July 1; for shareholders of record June 10; ex-div June 8.
May 15, 2015, 6:05 PM
- After having exited a prior GM position a year ago, David Einhorn's Greenlight Capital bought 9.5M shares of the auto giant in Q1, per Greenlight's Q1 13F.
- Einhorn previously disclosed the purchase, along with his reasoning, in his Q1 letter. "2015 should be a better year for GM: the company is a year closer to eliminating its losses in Europe; low gas prices should stimulate demand for its highly profitable SUV and light truck product lines; raw material costs are low; and we believe that the worst of the product recalls is behind them." He also noted GM's buyback, and called earnings estimates beatable.
- A 1.7M-share stake was taken in Macy's (NYSE:M), and a 1.1M-share stake in Ingram Micro (NYSE:IM). Greenlight's stake in Chicago Bridge & Iron (NYSE:CBI) was more than doubled to 6.7M shares, and its stake in AerCap (NYSE:AER) hiked by 49% to 5.6M.
- On the flip side, Greenlight liquidated a 1.3M-share stakes in Aetna (NYSE:AET) and Amdocs (NASDAQ:DOX). The firm cut its stake in chipmaker/long-time holding Marvell (NASDAQ:MRVL) by 63% to 9M shares, and in chip equipment maker Lam Research (NASDAQ:LRCX) by 33% to 1.7M shares.
Apr. 21, 2015, 12:24 PM
- ASML (ASML +1.5%), ASM International (ASMI +2.4%), Axcelis (ACLS +5.2%), and Rudolph Technologies (RTEC +2.3%) have joined Applied Materials and KLA-Tencor in trading higher after fellow chip equipment maker Lam Research (LRCX +8.2%) beat FQ3 estimates and provided strong FQ4 sales, EPS, and shipment guidance.
- On its CC (transcript), Lam mentioned demand from DRAM clients - Axcelis has strong exposure to them - remains solid thanks to 20nm process investments, and that it expects growing 2H15 3D NAND flash investments.
- Foundry equipment spend is expected to be down slightly Y/Y in 2015 - TSMC recently cut its capex budget - and logic spend roughly flat in spite of Intel's capex budget cut. In spite of the Intel/TSMC cuts, Lam is maintaining its general outlook for chip equipment spend.
- CEO Martin Anstice argued Lam will be competing for over 30% of chip equipment spend by 2017 (up from 28.5% today) as tech "inflections" related to multi-patterning, 3D chips, and advanced packaging - Lam claims to have a 50%+ share in these areas - drive share gains in the broader deposition, etching, and cleaning equipment markets.
- ASML remains below where its traded before the company slightly missed Q1 estimates, reported soft bookings (-26% Q/Q to €1.03B), and offered light Q2 guidance (revenue of €1.6B vs. a €1.69B consensus) on April 15. The photolithography equipment giant remains cautious about the adoption of EUV tools at the 10nm node (set to ramp in 2016/2017), but adds its "confidence has gone up" thanks to the improved performance of its 3300 series EUV systems.
Apr. 21, 2015, 9:22 AM
Apr. 20, 2015, 5:38 PM
Apr. 20, 2015, 4:52 PM
- In addition to beating FQ3 estimates, Lam Research (NASDAQ:LRCX) is guiding for FQ4 revenue of $1.46B (+/- $50M) and EPS of $1.46 (+- $0.07), above a consensus of $1.39B and $1.35.
- Shipments are expected to rise to $1.6B (+/- $50M) from FQ3's $1.497B (+20% Q/Q and topping a guidance midpoint of $1.45B). CEO Martin Anstice sings a well-known refrain. "Our differentiated products and services are directly addressing the market driving technology inflections of multi-patterning, 3D device architecture and advanced packaging."
- The deferred revenue balance rose 30% Q/Q to $485.2M. Gross margin (non-GAAP) fell 70 bps Q/Q and 80 bps Y/Y to 44.7%. Operating expenses rose 11% Y/Y to $355M. $124.9M was spent on buybacks.
- Shares have risen to $77.52 AH; the all-time high is $85.70. Goldman's table-pounding was well-timed.
- Peers are getting a lift: Applied Materials (NASDAQ:AMAT) is up 1.6% AH to $22.11, and KLA-Tencor (NASDAQ:KLAC) is up 1.1% to $59.20. KLA reports on Thursday.
- FQ3 results, PR
Apr. 20, 2015, 4:08 PM
- Lam Research (NASDAQ:LRCX): FQ3 EPS of $1.40 beats by $0.10.
- Revenue of $1.39B (+13.0% Y/Y) beats by $20M.
- Shares +5%.
Apr. 19, 2015, 5:35 PM
Apr. 14, 2015, 5:23 PM
- Intel has used its Q1 report to cut its 2015 capex budget by $1.3B to $8.7B (+/- $500M). The midpoint of the guidance range implies a 14% drop from a 2014 level of $10.1B, which itself was below 2011-2013 levels of $10.7B-$11B.
- Several chip equipment makers are lower AH in response. Applied Materials (NASDAQ:AMAT) -1.4%. KLA-Tencor (NASDAQ:KLAC) -1.5%. Lam Research (NASDAQ:LRCX) -1.4%. Kulicke & Soffa (NASDAQ:KLIC) -0.8%.
- In January, TSMC set an aggressive 2015 capex budget of $11.5B-$12B; Samsung is also expected to spend heavily this year. Between them, Intel, TSMC, and Samsung account for roughly half of all chip equipment capex.
Apr. 6, 2015, 2:34 PM
- Though "there has been a steady stream of cautious news from the semi sector over the past few weeks," there has also been positive news for Lam Research (NASDAQ:LRCX), argues Goldman's James Covello, reiterating a Conviction Buy and $91 target in response to Lam's March selloff.
- Specifically, Covello notes chip equipment giant Tokyo Electron (set to merge with Applied Materials, regulators willing) has pre-announced strong sales, and that Disco (a Japanese chip equipment firm that sells to Lam's top customers) posted better-than-expected earnings.
- Aside from the Japanese news, which Covello thinks helps offset negative news from Intel, Micron, SanDisk, and TSMC, Lam is expected to benefit from a 2H15 pickup from NAND flash clients (ramping 3D NAND investments). Cowen argued last week Lam and Applied Materials would benefit as 3D NAND manufacturing cost declines compelled manufacturers to boost their investments. "We believe that NAND revenues for LRCX could potentially increase by 3x (or $1.5 bn per year) as 3D NAND accelerates."
Mar. 25, 2015, 12:03 PM
- Chip stocks are particularly hard-hit (SOXX -3.6%) on a rough day for tech. The Nasdaq is down 1.3%, and the S&P 0.7%. Going into today, good earnings reports and ongoing M&A activity had led the Philadelphia Semi Index to rise 10% from its Jan. 30 close; the index remains up nearly 2x from its fall 2012 lows.
- AMD (AMD -7.2%) is a major decliner following a UBS downgrade. AMD rival/GPU giant Nvidia (NVDA -5.2%) and memory giant Micron (MU -3.7%) are also selling off, as are merger partners NXP (NXPI -3.8%) and Freescale (FSL -3.4%), RF chipmakers Avago (AVGO -5.2%), Skyworks (SWKS -5.3%), and Qorvo (QRVO -7.1%), LED/RF chipmaker Cree (CREE -4.1%), and high-flying video processor developer Ambarella (AMBA -4.3%).
- Other decliners include telecom chipmakers/ARM server CPU vendors Cavium (CAVM -4.8%) and AppliedMicro (AMCC -4.4%), microcontroller vendors Atmel (ATML -3.5%), Cypress (CY -5.5%), and STMicroelectronics (STM -3.5%), voice processor developer Audience (ADNC -3.7%), analog/mixed-signal chipmakers Linear (LLTC -3.7%), Maxim (MXIM -3%), and Intersil (ISIL -3.5%), FPGA maker Lattice (LSCC -3.9%), and mixed-signal/wireless charging IC developer IDT (IDTI -5.4%).
- Chip equipment, IP, and foundry providers are also underperforming. Big decliners include ARM (ARMH -4.4%), KLA-Tencor (KLAC -4.2%), Lam Research (LRCX -5.4%), ASML (ASML -4.1%), TowerJazz (TSEM -4.3%), Mattson (MTSN -4.5%), Ultratech (UTEK -4.7%), and Tessera (TSRA -6.1%). ASML has been downgraded to Hold by Banco Santander.
- TSMC (TSM -4.6%) is among the decliners in spite of a Digitimes report stating the foundry giant's sales are expected to rise 0%-5% Q/Q in Q2 - consensus is for a 2% drop - with strong Apple A8 CPU orders offsetting soft Qualcomm Snapdragon 810 orders.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Mar. 20, 2015, 12:55 PM
- Believing the company will offer soft FQ4 (June quarter) guidance to go with its April FQ3 report, Needham's Edwin Mok has cut his Lam Research (LRCX -0.2%) target by $2 to $93, while reiterating a Buy. Longer-term, he still expects Lam to perform well thanks to a 2H15 sales pickup driven by the company's strong exposure to FinFET (3D transistor) and 3D NAND process investments.
- Meanwhile, Mok has downgraded Ultra Clean (UCTT -8.6%) to Hold, citing expectations "for a weaker 2Q15 in the SemiCap space and the lack of growth driver for the year." He sees DRAM push-outs hurting Q2 sales, and thinks efforts to win new business will take time to bear fruit.
- Lam is missing out on a market rally, while Ultra Clean is off sharply. Lam sold off on Wednesday after JPMorgan reported Samsung is slowing the pace of its DRAM investments. Mok downgraded chip manufacturing materials supplier Cabot Microelectronics on Monday.
Mar. 18, 2015, 11:16 AM
- JPMorgan reports Samsung is slowing down the pace of its DRAM capacity ramp. The firm reiterates an Overweight rating and $40 target on Micron (MU +0.8%), whose shares have been hit more than once by Samsung spending fears.
- While Micron edges higher, chip equipment maker Lam Research (LRCX -4.3%), which has considerable DRAM exposure, is selling off. Mattson (MTSN -11.8%), Aixtron (AIXG -1.9%), and Axcelis (ACLS -1.1%), other equipment makers that have DRAM exposure, are also lower. Mattson dived around 11AM after initially posting moderate losses.
- Lam, a David Einhorn favorite, offered upbeat commentary about 2015 DRAM capex on its FQ2 CC (transcript), and noted 30% industry bit growth is expected this year.
- Also: 1) Drexel Hamilton has made upbeat comments about DRAM demand after talking with an unnamed Asian memory maker; the firm expects mobile DRAM demand to restore a supply/demand balance later this year. 2) Jefferies (Buy) has cut its Micron target by $5 to $40, predicting Q1 DRAM pricing weakness will continue into Q2 due soft PC demand, before smartphone demand and "corrective actions on the supply side" lead prices to stabilize.
- Yesterday: Micron drops on RBC target cut
Mar. 5, 2015, 4:55 PM
- Lam Research (NASDAQ:LRCX) is selling $500M worth of 2.75% senior notes due 2020, and $500M worth of 3.8% senior notes due 2025.
- The chip equipment maker only says it plans to use the proceeds for "general corporate purposes," and that they may include repaying debt, making acquisitions, or carrying out buybacks.
- Lam had over $2.9B in cash/short-term investments as of Dec. 28, and over $1.3B in debt.
Feb. 11, 2015, 4:46 PM
- Lam Research (NASDAQ:LRCX) declares $0.18/share quarterly dividend, in line with previous.
- Forward yield 0.89%
- Payable April 1; for shareholders of record March 11; ex-div March 9.
Lam Research Corp. engages in the supply of wafer fabrication equipment and services to the semiconductor industry. Its products include front-end wafer processing, back-end wafer-level packaging, and other related products. The company also designs, manufactures, markets, refurbishes, and... More
Industry: Semiconductor Equipment & Materials
Country: United States
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