On Wednesday, TD Cowen maintained a Buy rating on shares of Lam Research (NASDAQ:LRCX) with a steadfast price target of $100.00. The firm has selected the stock as a Best Idea for 2025, citing several growth factors. This aligns with broader market sentiment, as InvestingPro data shows 19 analysts have revised their earnings upward for the upcoming period.
The analyst pointed to the second year of under-investment in NAND Wafer Fabrication Equipment (WFE) and the easing of China restrictions as key reasons for their positive outlook. With a market capitalization of $96.48 billion and strong financial health metrics, Lam Research is expected to benefit from these market conditions, particularly with the potential for Kioxia to initiate new greenfield investments late in the calendar year 2025.
The analyst's projection for the NAND WFE sector is particularly bullish, expecting it to be the fastest-growing segment over the next two years. A compounded annual growth rate (CAGR) of 28% is anticipated, leading to a market size of $14 billion by the calendar year 2026. This growth is set to surpass other sectors like Leading-Edge Foundry/Logic, which is projected to grow at 11%, and DRAM at 3%.
The forecast for Trailing-Edge remains flat, while the overall WFE market is expected to see a 7% growth rate. For deeper insights into Lam Research's growth potential and comprehensive financial analysis, InvestingPro subscribers can access detailed Pro Research Reports, which transform complex Wall Street data into actionable intelligence.
The optimism for Lam Research is further bolstered by the expected rebound in NAND WFE by the calendar year 2026. This follows a significant drop in NAND capital expenditures in 2023 and 2024. Industry reinvestment rates, which were at 90% of gross profits from 2019 to 2022, are projected to fall to 35% in the calendar year 2024 and are estimated to recover to 50% in the calendar year 2025.
The analyst suggests that these figures indicate a strong recovery in the sector, driven by an increasing mix of enterprise Solid-State Drives (eSSD) and an upcoming refresh cycle in PCs and smartphones.
The company's solid financial position is reflected in its impressive gross profit margin of 47.69% and return on equity of 49%, according to InvestingPro data, which offers over 30 additional key metrics and insights for subscribers.
In other recent news, Lam Research has reported significant developments in its financial performance. The semiconductor company disclosed robust Q3 earnings, with revenues reaching $4.17 billion, marking an 8% increase from the previous quarter, and earnings per share of $0.86, surpassing guidance.
This represents the fifth consecutive quarter of revenue growth for the company. Lam Research also announced a $1 billion share repurchase program and paid $261 million in dividends.
In their recent annual meeting, shareholders elected all director nominees and approved executive compensation. The appointment of Ernst & Young LLP as the independent auditor for fiscal year 2025 also received ratification. TD Cowen, an analyst firm, maintained a Buy rating for Lam Research, citing the company's strong performance in materials engineering.
Despite anticipating a decline in revenue contribution from China, Lam Research remains optimistic about the NAND and advanced packaging sectors, expected to drive revenue growth into 2025.
The company's revenue projection for December 2024 stands at $4.3 billion, and it expects wafer fabrication equipment spending to remain stable in 2024 and grow in 2025. These are recent developments reflecting the company's continued growth and strategic focus.
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