Goldman Downgrades Lam Research, Eyes Downturn In Memory Market

Goldman Sachs lowered its coverage view Wednesday on the semiconductor capital equipment space from Attractive to Neutral and dropped its bullish stance on Lam Research Corporation LRCX.

The Analyst

Goldman Sachs analyst Toshiya Hari downgraded Lam Research from Buy to Neutral and lowered the price target from $224 to $180.

The Thesis

Lam has one of the best management teams in Goldman’s coverage universe and will likely continue to gain market share in the etch and deposition markets, Hari said in the downgrade note. (See the analyst's track record here.)

Yet Goldman is taking a more negative view of the group as a whole, and Hari said Lam is unlikely to outperform in the current environment.

“While there was initially hope that Samsung’s decision to push out DRAM spending was specific to the company and was related to node transition issues as opposed to supply/demand issues, we now envision a more broad-based correction in memory capex in 2019, as memory manufacturers digest what we perceive to be excess capacity in NAND and to a lesser extent DRAM,” the analyst said.

Goldman’s 2019 and 2020 EPS estimates for Lam are 15 percent and 23 percent below the consensus, respectively.

In the longer term, Goldman is still constructive on the industry beyond the next six to 12 months. Until then, Lam and other stocks in the space will likely struggle to hit earnings targets, Hari said.