Lam Research added to Citi's U.S. Focus List on attractive valuation
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Lam Research (NASDAQ:LRCX) received some positive commentary from Wall Street, as investment firm Citi added the semiconductor equipment company to its U.S. Focus List, noting it has several positives going for it, including an attractive valuation
Analyst Atif Malik, who has a buy rating and a $750 price target on Lam (LRCX), implying some 43% upside from current levels, noted that shares are down 28% year-to-date compared to a group average of 18%. The gap between Lam and the rest of the group is likely due to Lam missing sales expectations for its most recent quarters, as a sub system supplier issue hurt results.
There are also concerns that Lam Research's (LRCX) gross margins in the first-half of the year are going to be "flattish" at roughly 45% due to the ramp up from its Malaysia factory, as well as the transition to gate all around transistors, which should help Lam Research (LRCX) grow foundry sales, though that was pushed out to next year.
"With the stock trading at 10%/25% discounts to peers/3-year average, we see ~44% [expected total return], low downside risk to our $80 [billion] down 20% year-over-year wafer fabrication equipment in 2023, and and positive NAND newsflow to help the stock," Malik wrote in a note to clients.
Lam Research (LRCX) shares dipped slightly more than 0.5% to $522.64 in premarket trading on Friday.
In addition, Lam Research (LRCX) has a few catalysts in the coming months that could move the stock higher, including improving NAND memory fundamentals and rising prices, as NAND equipment sales made up approximately 73% of overall memory sales.
There's also expectations that gross margins could improve approximately 100 basis points in the second half of 2022 "partly as Malaysia factory ramps," Malik added.
Lam Research (LRCX) is seen as one of the companies that could benefit from the semiconductor industry "re-shoring" into the U.S., according to Bank of America.