Lam Research stock jumps 7% as Wall Street debates whether bottom is in
Sundry Photography/iStock Editorial via Getty Images
Lam Research (NASDAQ:LRCX) gained more than 7% on Thursday as Wall Street weighed in on the semiconductor equipment company's third-quarter results and debated whether the industry is on the rebound.
Morgan Stanley analyst Joseph Moore, who reiterated the firm's overweight rating on Lam Research (LRCX), was tepid in his enthusiasm, adding that comments about wafer fab equipment spending being back-loaded to the second half of the year did not boost confidence, but the company still has earnings power.
"We are still cautious about [second-half], even as management optimism grows; this has been a brutal memory cycle, low spending in memory could get lower, record foundry will probably slow, and the surge in trailing edge China foundry creates some risks," Moore wrote in an investor note. 
"But we still see earnings and cash generation power of $20 in the worst memory market in 15 years, which seems positive relative to memory customers posting billions in losses, and very high service revenue as a percentage of revenues will rebound when utilizations increase," Moore added.
Other chip equipment makers also advanced, as ASML (ASML) rose 1.6%, while KLA Corp. (KLAC) and Applied Materials (AMAT) shares both rose more than 3.5%.
A number of other semiconductor stocks finished with fractional gains, including AMD (AMD) and Qualcomm (QCOM), while Skyworks Solutions (SWKS) erased earlier gains and Nvidia (NVDA) and ON Semiconductor (ON) finished near session lows.
Moore added that after June, the driver of revenue for Lam (LRCX) is going to be shipments of tools and services and deferred revenue impact should be mostly ignored. 
KeyBanc Capital Markets analyst Steve Barger, who has a sector-weight rating on Lam Research (LRCX), said although the third-quarter results topped consensus, the weaker-than-expected guidance for the upcoming quarter may actually be the "trough," as evidenced by its "resilient" services business and opportunities in foundry, logic, trailing edge tools and even in China.
"We think these factors suggest LRCXâs June quarter could be trough, and we think it should be well positioned for the upturn when it occurs," Barger explained. "That said, while we think the worst of the cyclical decline and estimate revisions are behind us, we also think conditions will push timing expectations for recovery to the right, meaning forward estimates could still come down."
Barger "modestly" lowered his fiscal 2023 and fiscal 2024 earnings estimates on back of the results.
Looking ahead, Lam (LRCX) expects fiscal fourth-quarter sales to be $3.1B, plus or minus $300M, with gross margins 43.2%, plus or minus 1%. It expects earnings to be $4.75 per share, plus or minus 75 cents.
Analysts are expecting $3.45B in revenue, gross margins of 43.7% and $5.55 per share in earnings.
Citi recently reiterated its preference for Lam Research (LRCX) and several other semiconductor equipment companies prior to earnings.