What Happened?
Shares of semiconductor equipment maker Lam Research (NASDAQ:LRCX) jumped 7.5% in the morning session as semiconductor stocks, especially the memory chip manufacturers, surged after Micron reported impressive fourth-quarter earnings results. Micron beat across most of the key metrics we track, including revenue, operating profit, and EPS.
Notably, the company recorded a whopping 93% revenue growth compared to the previous year, showing that the AI party is still ongoing. Micron attributed the outperformance to the growing demand for memory chips that power generative AI applications. Looking ahead, Micron provided strong sales and profitability guidance for the next quarter, which exceeded Wall Street's expectations.
Overall, the result highlights the abundant growth opportunities for chip makers with technologies to accelerate the booming AI trend.
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What The Market Is Telling Us
Lam Research’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 5% on the news that company reported second-quarter results that surpassed analysts' revenue expectations, driven by better-than-expected systems and customer support revenue. EPS also beat, and its inventory levels shrunk.
On the other hand, its operating margin declined. Overall, this was a strong quarter that should satisfy shareholders.
Following the results, Goldman Sachs analyst Toshiya Hari reiterated a Buy rating and raised the price target on the stock from $700 to $912. He added, "Although the Wafer Fab Equipment market is likely to trend sideways or grow only modestly in [2024], we believe Lam – who has strong competitive positions in Etch and Deposition and has disproportionately high market share in [high-bandwidth memory] – is well-positioned to outperform the market in [2024]."
Lam Research is up 13.8% since the beginning of the year, but at $852.85 per share, it is still trading 24.3% below its 52-week high of $1,127 from July 2024. Investors who bought $1,000 worth of Lam Research’s shares 5 years ago would now be looking at an investment worth $3,512.
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