Lam Research (LRCX) likely to post weak Q1 2020 earnings

Lam Research Corporation (NASDAQ: LRCX) is set to report its earnings results for the first quarter of 2020 on Wednesday after the market closes. The results will be hurt by multiple headwinds including the US-China trade tariffs softening global economy, the cryptocurrency crash, and the weak demand for memory equipment.

The majority of the top line comes from the memory equipment segment that includes equipment for dynamic random-access memory (DRAM) and non-volatile memory (NVM) production. The company will experience a lower customer base due to weak demand for products including NVM, DRAM, and logic devices.

The company could face an increase in the semiconductor capital expenditures spending on memory equipment due to its investment to keep up with the market demand for integrated circuits. The demand in the memory market is expected to increase which could be the biggest driver in future revenue growth. This is likely to lift Capex spending on wafer equipment.

The company continued to prioritize investment in innovation and product differentiation, shifting a higher percentage of total operating expenses to research and development than in any prior quarter. The company continues to see healthy spending in the Foundry segment that is heavily focused on the 5 and 7-nanometer nodes. For the balance of the calendar year, Lam expects to see continued strength in the Foundry and Logic space.

Read: Nvidia rebounds on new promising growth area

Analysts expect the company’s earnings to drop by 10.40% to $3.01 per share and revenue will fall by 7.30% to $2.16 billion for the first quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $233.10.

For the fourth quarter, Lam Research reported a 47% dip in earnings due to lower revenues. For the first quarter, the management expects revenues in the range of $2 billion to $2.3 billion and adjusted earnings in the range of $2.80 to $3.20 per share. Unadjusted earnings are anticipated to be in the range of $2.71 to $3.11 per share for the first quarter.

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