Summary
Q3 revenue at $3.8bn slightly above guidance.
Increase in spares sales signals things are looking up.
Rating: Hold.
Read on !!
DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
Memories Unfade
by “Jams O’Donnell"
Lam Research (LRCX) reported earnings for Q3 2024 on April 24th. No surprises with respect to the previous quarter's guidance: semiconductor capital equipment suppliers are deeply embedded in the R&D and technology roadmap of their customers; lead time - time from order to delivery - is quite long; they usually know a year or more in advance what they're going to deliver in a given quarter.
Fluctuations, when they happen, deliver valuable data points on the state of the industry cycle. For LRCX in Q3 2024, the really good news is the uptick in spares sales. In CEO T. Archer's own words:
"[...] we've seen an uptick in fab utilization and in the March quarter, this is
translated into double digit percent growth quarter-over-quarter in our
spares revenues. [...]"
"We sold more spares" is the agreed-upon passphrase to communicate that the bottom is in for memory. As a refresher, Lam Research's main line of business is - or used to be - equipment to manufacture volatile and non-volatile memory chips. But memory has been hit particularly hard in the current semi downturn, with this equipment sitting in the fabs at the lowest levels of utilization the industry remembers. Lam's revenue has suffered accordingly (see below), revenue share from the memory segment is now at 44% vs 70% in 2019.
Now things are looking up again. Not so up that memory manufacturers have started buying new equipment (that would show up on KLA Corp's - $KLAC - balance sheet first), but up enough that existing tools are being refurbished and upgraded. In the next quarters we will see the uptick in spares sales ripple through to the Services business segment.
Read on for fundamental, valuation and technical analysis of LRCX stock.
We have upgraded our service to provide More Coverage, Deeper Analysis for Same Money. Subscribe to our one newsletter service, Cestrian Market Insight which will include a daily market analysis note, Continuous coverage of around 80-90 single-name stocks and ETFs, Extensive investor education material and Macro commentary and insight. If you’d like to sign up for the Cestrian Market Insight newsletter - you can do so by clicking the button below. Just choose the “Market Insight” option.