IB Net Payout Yields Model

Lam Research: $5 Billion Reasons To Buy

Lam Research (LRCX) reported a strong quarter after the close and the stock is up about 5% in initial trading. The company provided the market with $5 billion reasons to own the stock.
Lam Research reported the following FQ2 numbers:

  • Q2 Non-GAAP EPS of $3.87 beats by $0.21
  • Revenue of $2.52B (-2.3% Y/Y) beats by $20M.
The company announced a massive $5 billion share buyback. The amount is massive for a market cap of only $22 billion heading into earnings. The potential 20%+ share reduction is impressive, but Lam Research only has net cash of about $2 billion so the semiconductor company can't just snap up all those shares without taking on debt.

The company along Applied Materials (AMAT) appear to have spent aggressively on share buybacks near the market top in early 2018. These companies need to show better signs of understanding the cycle when repurchasing shares.

The stock does appear cheap trading at 10x FY19 estimates.

Update 1/24
Interesting to here Cramer suggest Lam Research signaled a bottom in the market, yet several analysts cut price targets after the results.
  • Stifel lowers its Lam Research price target from $229 to $209 while maintaining a Buy rating.
  • Mizuho cuts its target by $5 to $160 and maintains a Neutral rating. The firm says the positive guidance could signal a near-term peak for March quarter revenues.
Don't necessarily understand the "turn" call by Cramer as the company seems to suggest a weaker March quarter.

Disclosure: No position. Please review the disclaimer page for more details. 


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