Mon, Apr. 6, 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."
Wed, Mar. 25, 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
Fri, Mar. 20, 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.
Wed, Mar. 18, 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
Thu, Mar. 5, 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.
Wed, Feb. 11, 4:46 PM
Wed, Jan. 28, 4:11 PM
Tue, Jan. 27, 5:35 PM| Tue, Jan. 27, 5:35 PM | 4 Comments
Fri, Jan. 16, 7:17 PM
- A day after some industry names outperformed modestly following news TSMC (NYSE:TSM) set a high 2015 capex budget of $11.5B-$12B, chip equipment makers generally traded in-line with a rising tech sector after another one of their big-3 customers, Intel, set a conservative 2015 capex budget of $9.5B-$10.5B.
- TSMC's 2015 budget is well above a 2014 capex level of $9.52B; the world's biggest foundry is both trying to keep up with rising mobile chip orders, and investing heavily to roll out its 16nm FinFET/FinFET+ processes to counter Samsung and Globalfoundries' 14nm FinFET rollouts.
- The midpoint of Intel's 2015 budget is slightly below 2014 spending of $10.1B, which itself was below prior guidance of $10.5B-$11.5B. It's also below 2011-2013 spending of $10.7B-$11B.
- Some cautiousness from Intel might have been expected: Gartner recently forecast industry capex would rise just 0.8% this year to $65.8B, albeit with wafer fab spend rising a healthier 6.7% to $33.7B. Gartner forecast memory capex would rise 13.5% and foundry capex 4.8%, but predicted logic capex (much of it from Intel) would decline 5.3%.
- Also: TSMC has disclosed it sold the 21M-share stake it took in ASML in 2012 for $1.5B, booking a $660M profit along the way. TSMC, Intel, and Samsung each invested in ASML with the goal of accelerating its EUV lithography R&D efforts (viewed as necessary to maintain Moore's Law long-term).
- Between them, Intel, TSMC, and Samsung account for over half of industry capex.
- Chip equipment firms: AMAT, KLAC, LRCX, TER, KLIC, ACLS, UTEK, RTEC, MTSN, ATE, XCRA, OTCPK:TOELF
Dec. 18, 2014, 10:34 AM
- Citi has added Applied Materials (AMAT +1.5%) its Focus List, and hiked its target all the way to $36. Meanwhile, Applied rival/David Einhorn favorite Lam Research (LRCX +2.1%) has been upgraded to Buy, and chip test equipment maker Teradyne (TER -0.1%) to downgraded to Neutral.
- Citi thinks Applied could deliver over $2.50/year in EPS once the Tokyo Electron (OTCPK:TOELF) merger closes - well above the $1.80 forecast in October by BofA. Regulators are still vetting the deal.
- Meanwhile, Japan's semi equipment trade association (SEAJ) has reported (.pdf) a November rolling 3-month book-to-bill of 1.33 for local equipment makers. That's well above October's 1.11 and September's 0.93.
- AMAT and LRCX are following markets higher - the Nasdaq is up 1.5% - while Teradyne is underperforming.
- Previous: Berenberg bullish on Applied and Lam, cautious on KLA and ASML
Dec. 13, 2014, 8:45 AM
- American Airlines (NASDAQ:AAL), Electronic Arts (NASDAQ:EA), and Lam Research (NASDAQ:LRCX) will be added to the Nasdaq 100 (NASDAQ:QQQ) ahead of the open on December 22.
- Removed will be Expedia (NASDAQ:EXPE), F5 Networks (NASDAQ:FFIV), and Maxim Integrated (NASDAQ:MXIM).
- A revision to the index methodology allows multiple share classes of index participants to be included, so Comcast Class A Special (NASDAQ:CMCSK), Twenty-First Century Fox Class B (NASDAQ:FOX), and Liberty Global Class C (NASDAQ:LBTYK) will also become part of the index.
- Source: Press Release
- ETFs: QQQ, PSQ, TQQQ, QID, SQQQ, QLD, QQEW, QQQE, QQXT
Nov. 28, 2014, 2:32 PM
- Berenberg's Tammy Qiu declares Applied Materials (AMAT - Buy reiterated) and Lam Research (LRCX - launched at Buy) to be two of her favorite chip equipment plays ahead of an expected 2015/2016 slowdown in semi capex.
- Like David Einhorn and others, Qiu expects Lam to gain chip equipment share thanks to strong exposure to the FinFET (3D transistor) etching and 3D NAND flash deposition/etching markets.
- Applied is expected to benefit from both FinFET/3D NAND exposure and Tokyo Electron (OTCPK:TOELF) merger synergies. Qiu: "We believe TEL can improve its margin following the merger with AMAT, from single-digit to above 20%, by exiting non-profitable business, optimizing operations and platform alignment with AMAT."
- She's less enthusiastic about KLA-Tencor (NASDAQ:KLAC) and ASML, launching the former at Hold and reiterating a Hold on the latter. Though liking KLA's process control share (helps with regards to FinFET exposure), Qiu considers shares fairly valued at 21x estimated FY15 (ends June '15) EPS.
- ASML, meanwhile, is expected to see a relatively slow EUV sales ramp. Qiu expects ASML to ship only 40 EUV tools in 2019, below management's guidance for 50-60. In addition, sales of ArFi lithography tools are expected to "decline over time due to re-use and efficiency improvements."
- Altogether, Qiu forecasts semi capex will grow just 2% in 2015 and decline 7% in 2016, after growing 12% in 2014. Memory capex is expected to fare better than foundry/logic capex.
Nov. 24, 2014, 12:26 PM
- Citing stronger-than-expected DRAM demand, a $1B buyback, the Inotera JV's Q3 results, and a weak yen, Goldman's James Covello has hiked his Micron (MU +1.8%) target by $3 to $32, albeit while reiterating a Neutral.
- SanDisk (SNDK +1.9%), which receives a favorable mention in Covello's note, is also outperforming. As is chip equipment maker Lam Research (LRCX +2.8%), which has considerable DRAM/NAND exposure and has seen its target hiked by $6 to $91. The Nasdaq is up 0.7%.
- Covello: "We are now modeling about 1% DRAM undersupply in 2015 (from balanced prior) ... Our new content estimates for phones, tablets and servers are now all modestly above third party forecasts to better reflect this."
- Nonetheless, Covello remains more partial to SanDisk, due to a belief the DRAM industry's EBIT margins (among the highest in the chip industry) are unsustainable. "We expect excess returns to continue to attract supply (creating upside risk to our 2015 base case supply estimate of 25% yoy) ... DRAM capex is up about 40% yoy in 2014E and tracking higher in 2015E." Bulls are counting on industry consolidation to keep a lid on supply growth.
Nov. 10, 2014, 5:02 PM
Oct. 22, 2014, 5:04 PM
- Though it beat FQ1 EPS estimates and posted in-line revenue, Lam Research (NASDAQ:LRCX) is guiding for FQ2 revenue of $1.23B (+/- $50M) and EPS of $1.12 (+/- $0.07), unfavorable to a consensus of $1.25B and $1.16. Shipments are expected to total $1.24B (+/- $50M).
- Gross margin rose 140 bps Y/Y in FQ1 to 43.9%, and op. margin 420 bps to 14.6%. A GM of 45.5% (+/- 1%) is expected in seasonally strong FQ2.
- Shipment growth by geography: U.S. (inc. Intel) +25%, Korea (inc. Samsung/SK Hynix) +16%, Taiwan (inc. TSMC) +21%, Japan +11%, China +8%, SE Asia +11%, Europe +8%.
- FQ1 results, PR
Oct. 22, 2014, 4:14 PM
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