By Peet Serfontein & Hashmeel Suka
Lam Research is a leading manufacturer and supplier of electronic processing hardware (particularly wafer-fabrication equipment) used in the production of semiconductors and integrated circuits. The company's cutting-edge products and solutions are used in various electronic devices such as mobiles, wearables, PCs, and servers.
The company has displayed robust growth over the past five years, with adjusted EPS and revenue climbing ~16% and ~9%, respectively (on a compounded annual basis). This has been driven by significant demand for semi-conductors amid a boom in consumer electronic usage and data centre/cloud computing services as well as secular support from advancements in AI and autonomous technology.
Technically, the stock is trading at the start of Wave B of the Elliot Wave pattern. This is typically seen as a corrective phase in the stock price, marking a temporary bullish reversal amid improving market sentiment. This presents a buying opportunity for investors, notably for some short-term gains.
The stock is trading below the 200-day simple moving average (SMA) of $893, but above the 200-week SMA, which is a stronger indicator of the long-term bullish trend.
Fading downside price momentum according to the MACD indicator as well as sidewards movement of the On-balance Volume indicator, supports our bullish stance.
Share Information
| Share Code | LRCX US |
|---|---|
| Industry | Semiconductor Equipment and Manufacturing |
| Market Capital (USD) | 102.7 billion |
| One Year Total Return | 28.71% |
| Return Year-to-Date | 1.70% |
| Current Price (USD) | 791.06 |
| 52 Week High (USD) | 1,130.00 |
| 52 Week Low (USD) | 574.42 |
| Financial Year End | June |
| The stock price has come under some pressure over the past two months, though various technical indicators suggest an imminent recovery. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 30.28 | 35.66 | 45.04 | 50.19 |
| Growth (%) | 17.78 | 26.30 | 11.42 | |
| Dividend Per Share (USD) | 8.00 | 8.46 | 8.97 | 9.62 |
| Growth (%) | 5.8 | 5.98 | 7.26 | |
| Forward PE (times) | 20.86 | 17.09 | 15.76 | |
| Forward Dividend Yield (%) | 1.07 | 1.13 | 1.22 | |
| Earnings growth over the medium term is expected to be strong. | ||||
Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | HD US - Take profit (Close the position) | ETN US - Buy (Continue to hold) | FAST US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 353.79 | 297.69 | 66.90 |
| Current | 400.66 | 327.39 | 71.81 |
| Movement | +13.2% | +10% | +7.3% |
| The stock price has reached our target. |
Price action that gave a "buy" signal based on a Bollinger Band strategy remains of interest. Remains above its 200-day simple moving average. Fading downside price momentum supports the trade.
Our profit target remains at $352, with a trailing stop-loss at $306. Exit the trade by 13 December 2024. |
A developing rising wedge pattern remains of interest. Remains above its 200-day simple moving average. Upside price momentum supports the strategy.
Our profit target is $75, with a trailing stop-loss of $68.40. Exit trade by 23 October 2024. |
| Share Name and position | RJF US - Buy (Continue to hold) | CCL US - Buy (Continue to hold) | AMZN US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 117.58 | 18.03 | 187.00 |
| Current | 124.16 | 18.73 | 193.96 |
| Movement | +5.6% | +3.9% | +3.7% |
|
A broadening top pattern remains attractive. The stock remains above its 200-day SMA, and emerging upside price momentum is supportive.
Our profit target is $132, with a trailing stop-loss at $118. Exit the trade by 6 December 2024. |
Price action at the start of Wave 5 of the Elliott Wave pattern remains of interest. The stock is trading above its 200-day SMA, and upside momentum is supportive.
Our profit target is $21 with a trailing stop-loss at $17. Exit the trade by 4 December 2024. |
A Piotroski F-score of seven continues to be of interest. The stock is trading above its 200-day SMA with fading downside momentum being supportive.
Our profit target is $217, with a trailing stop-loss of $182. Exit the trade by 13 December 2024. |
