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Lam Research Is Up On Weak Outlook - What's A Trough?


  • In its recent earnings call, Lam Research's CFO stated that "the September quarter marks a near-term trough for our business."
  • My calculations estimate that the "trough" will last at least two quarters.
  • Investors have chosen to accept management's explanation that the weakness is temporary, as shares have risen 7.5% since the earnings call.
  • Investors have also disregarded uncertainty in memory equipment spend, memory pricing volatility, and lackluster logic chip sales.

Lam Research (NASDAQ:LRCX) reported quarterly earnings of $5.31 per share, beating the consensus estimate of $4.94 per share. Downside Q1 guidance has revenue of $2.15 billion to $2.45 billion (consensus: $2.77 billion) with an EPS of $3 to $3.40 (consensus: $3.89).

The company reported revenues of $3.13 billion, beating by $70 million. For the September 2018 quarter, Lam Research expects revenue to be $2.3 billion, plus or minus $150 million. Adjusted earnings are expected to be $3.20 per share, plus or minus $0.20.

Douglas R. Bettinger - Lam Research Corp.’s CFO stated in the company's FY Q4 earnings call:

"As we sit here today, we believe the September quarter marks a near-term trough for our business."

Table 2 presents an analysis of the semiconductor equipment market according to The Information Network’s report “The Global Semiconductor Equipment Market: Markets, Market Shares, Market Forecast.”

Table 2 shows that total semiconductor equipment for CY 2017 was $56.6 billion and segmented by region. 1H 2018 revenues are also detailed by region and the share by region is presented.

Martin Brian Anstice, Lam Research Corp commented in the earnings call:

“We noted last quarter that we expected low double-digit WFE growth in 2018… We now plan overall 2018 WFE up year-over-year in the single-digit range.”

Using 2018 growth of 10%, equipment revenues are forecast to be $62.3 billion. Based on the percentage share for 1H 2018, revenues are calculated for 2H 2018 and for the entire 2018. U.S. revenues for CY 2018 are forecast to be $26.7 billion.

I’ve calculated and estimated Lam’s “Trough” in Table 3. Lam’s revenues for CY 1H 2018 were $6.0 billion. The company’s outlook for the September quarter is $2.3 billion. Note that these reported revenues are for equipment, service, and spare parts, whereas revenue in Table 2 is “equipment only.” Based on previous years, Lam’s equipment comprised 82% of total revenues. Thus, the company had

This article was written by

Robert Castellano profile picture
Providing a deep knowledgebase for better semiconductor stock investments

Dr. Robert N. Castellano, is president of The Information Network www.theinformationnet.com. Most of the data, as well as tables and charts I use in my articles, come from my market research reports. If you need additional information about any article, please go to my website.

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I received a Ph.D. degree in chemistry from Oxford University (England) under Dr. John Goodenough, inventor of the lithium ion battery and 2019 Nobel Prize winner in Chemistry. I've had ten years experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University.

I have been Editor-in-Chief of the peer-reviewed Journal of Active and Passive Electronic Devices since 2000. I authored the book "Technology Trends in VLSI Manufacturing" (Gordon and Breach), "Solar Panel Processing" (Old City Publishing), "Alternative Energy Technology" (Old City Publishing). Also in the solar area, I am CEO of SolarPA, which uses a proprietary nanomaterial to coat solar cells, increasing the efficiency by up to 10%. I recently published a fictional novel Blessed, available on Amazon and other sites.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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