Chip gear stocks surged Thursday after Lam Research reported better-than-expected June-quarter results and gave an upbeat outlook. LRCX stock spiked on the news.
Fremont, Calif.-based Lam late Wednesday said it earned an adjusted $5.98 a share on sales of $3.21 billion in its fiscal fourth quarter ended June 25. Analysts polled by FactSet had expected Lam earnings of $5.07 a share on sales of $3.13 billion. However, on a year-over-year basis, Lam earnings fell 32% while sales dropped 31%.
For the current quarter, Lam predicted adjusted earnings of $6.05 a share on sales of $3.4 billion. Wall Street called for earnings of $5.56 a share on sales of $3.3 billion in the fiscal first quarter. In the year-earlier period, Lam earned an adjusted $10.42 a share on sales of $5.07 billion.
Lam and its peers have seen sales and earnings decline amid a cyclical downturn in chip demand.
Trade group SEMI predicts that global sales of semiconductor manufacturing equipment will rebound next year, rising 14.4% to $100 billion. This year, chip gear sales are predicted to drop 18.6% to $87.4 billion, following record sales of $107.4 billion in 2022.
LRCX Stock Jumps After Report
On the stock market today, LRCX stock surged 9.3% to close at 701.95. That's its highest level since January 2022.
IBD's semiconductor equipment group was the second-best performing industry group on Thursday, rising 5%.
The chip gear group ranks No. 11 out of 197 industry groups that IBD tracks. It ranked No. 18 last month, No. 27 three months ago and No. 43 six months ago, according to IBD MarketSmith.
Other semiconductor equipment stocks posting big gains on Thursday included Applied Materials, ASML and KLA.
Lam Research Gets Price-Target Hikes
At least a dozen analysts raised their price targets on LRCX stock after the earnings report.
Wall Street expects Lam to benefit from a recovery of the memory chip segment, fueled by investments in infrastructure to support artificial intelligence applications.
UBS analyst Timothy Arcuri sees the AI computing infrastructure spending wave lasting for the next four to six quarters.
Arcuri reiterated his buy rating on LRCX stock and raised his 12-month price target to 750 from 725.
Riding The AI Wave
However, CFRA Research analyst Stewart Glickman believes the good news is already priced into LRCX stock.
"We think LRCX is riding a wave of enthusiasm from generative AI and a potential inflection point in memory," he said in a note to clients. "Prices already reflect a major recovery."
Glickman raised his 12-month price target on LRCX stock to 728 from 594 but downgraded it to hold from buy.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
