Lam Research shares rose Thursday as investors surmised that LRCX stock had finally bottomed after a long slide.
The semiconductor equipment maker late Wednesday beat Wall Street's targets for the September quarter and guided higher for the current period. But it warned that U.S. export restrictions on China will hurt its sales next year.
The Fremont, Calif.-based company earned an adjusted $10.42 a share on sales of $5.07 billion in its fiscal first quarter ended Sept. 25. Analysts polled by FactSet expected Lam earnings of $9.57 a share on sales of $4.92 billion. On a year-over-year basis, Lam earnings increased 25% while sales climbed 18%.
For the current quarter ending Dec. 25, Lam forecast adjusted earnings of $10 a share on sales of $5.1 billion. That's based on the midpoint of its outlook. Wall Street had been predicting earnings of $9.09 a share on sales of $4.81 billion in the fiscal second quarter. In the year-earlier period, Lam earned $8.53 a share on sales of $4.23 billion.
LRCX Stock Rises After Report
"Solid execution combined with easing supply chain conditions produced strong overall performance," Chief Executive Tim Archer said in a news release. "While we expect weaker wafer fabrication equipment spending in 2023, our technology leadership and demonstrated track record of managing through downturns provide us a strong foundation to capture the exciting opportunities ahead for the semiconductor industry."
Lam predicted that wafer fabrication equipment sales industrywide will fall more than 20% year over year in 2023, led by a downturn in the memory-chip segment.
On the stock market today, LRCX stock rose 7.8% to close at 355.87. LRCX stock hit a record high of 731.85 on Jan. 4.
Lam shares fell in after-hours trading Wednesday when it warned that new U.S. export restrictions targeting China will cut into its revenue next year.
Quantifying China Trade Impact
Lam said the loss of business in China will reduce its sales by $2 billion to $2.5 billion in 2023. That's about 12% of its sales. The Biden administration is banning the sale of advanced semiconductor technology in China because of concerns about its use by China's military as well as anticompetitive behavior by Chinese chipmakers.
China accounted for 30% of Lam's revenue in the September quarter while Taiwan made up 22% of sales. South Korea was its third-largest market at 17% of revenue.
Lam Research provides wafer fabrication equipment and services to the semiconductor industry. It makes deposition, etch and cleaning systems for computer chip production.
Lam is likely the most impacted chip gear maker from the latest U.S. export control regulations targeting China, Evercore ISI analyst C.J. Muse said in a note to clients. That's because Chinese memory-chip maker YMTC is a major customer, he said. Muse rates LRCX stock as outperform with a price target of 450.
Last week, industry peer Applied Materials warned that the China trade curbs will cut its revenue by about 6%, or $400 million, in the current quarter. Meanwhile, ASML said Wednesday it expects limited impact on its business from the export restrictions.
LRCX stock ranks No. 12 out of 29 stocks in IBD's semiconductor equipment industry group, according to IBD Stock Checkup. It has a subpar IBD Composite Rating of 43 out of 99.
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