Lam Research (LRCX) has what it takes to tap into opportunities

After sending out mixed cues in the early weeks of the pandemic, Lam Research Corp. (NASDAQ: LRCX) has emerged as one of the best-performing technology companies, often outshining its rivals. While the initial response to the company’s positive first-quarter report was not very encouraging, the sentiment changed for the better later.

---

Read management/analysts’ comments on Lam’s Q1 earnings

---

The Fremont-based firm, a leading supplier of wafer fabrication equipment to the semiconductor industry, is currently developing a pipeline of diversified products and services for equipping customers to meet the growing demand for high-tech devices. The stable demand conditions bode well for the stock, which is expected to remain on an upward trajectory in the foreseeable future. Analysts are bullish on the stock’s prospects and unanimously recommend buying it.

China Recovery

The company’s resilience to the virus crisis can be linked to the steady recovery the Chinese semiconductor industry is witnessing, which accounts for the lion’s share of its sales. Adding to the optimism brought about by the easing China-related concerns, Lam Research sees significant opportunity in the proposed investment by chipmaker and its customer Taiwan Semiconductor Manufacturing in Arizona. Earlier, trade restrictions imposed by the US government had impacted Lam Research’s wafer fab equipment shipments to certain Chinese customers.

The growing investor interest in the company’s stock shows the market has noticed the unfolding opportunity. In general, its customers are currently thriving on the pandemic-driven digital transformation wave. Besides the robust demand for modern semiconductor products, the other key growth drivers are emerging technologies like IoT, artificial intelligence, and 5G networks.

From Lam Research’s Q1 2021 earnings conference call:

From a market perspective, we see positive momentum in the underlying drivers of semiconductor growth and believe this translates into a healthy outlook for Lam’s business. Work and learn from home trends continue to drive demand in key electronic categories, including PCs, storage, and networking. Third-party data suggests that growth in PC, notebook, and workstation shipments in the calendar third quarter surpassed a 10-year high to reach record levels.

Record Results

The company entered fiscal 2021 on an upbeat note, reporting financial results that topped expectations. Adjusted earnings increased to $5.67 per share in the September-quarter on revenues of $3.18 billion, which represented a 47% rise from the year-ago period. China continues to be the largest market — followed by Korea and Taiwan — where the majority of semiconductor plants operate.

High Demand

Aggressive investments in supply chain capabilities and manufacturing are giving the company the strength to fulfill orders even as the market-reopening gains momentum. It is estimated that the demand for wafer fabrication equipment would keep growing across the memory market through next year, thanks to the growth in tech spending.

---

After strong Q4, Micron gears up to tame lingering headwinds

---

The stock returned to the growth path after a sluggish phase and climbed to an all-time high this week. Currently trading far above the pre-pandemic levels, the shares gained about 50% in the past twelve months, outperforming the market. Part of the recent rally can be linked to the general uptick technology stocks are currently witnessing.