Nomura: Buy The Pullback In Lam Research

Lam Research Corporation LRCX shares have shed about 14 percent since late November, and at least one analyst thinks now is the right time to build positions in the stock.

The Analyst

Nomura analyst Romit Shah upgraded his rating on shares of Lam Research from Neutral to Buy and maintained a $215 price target.

The Thesis

The pullback in Lam Research shares from $220 to about $185 is an early Christmas gift for investors with a 12-month horizon, Shah said in a Wednesday note. (See Shah's track record here.) 

Lam Research is the biggest beneficiary of the U.S. repatriation tax plan among companies in his coverage universe, Shah said. 

With repatriated profit, Lam Research could buy back $5-6 billion in shares, boosting calendar year 2018 GAAP EPS at the midpoint by about $1.19 from $15.21 to $16.40, according to Nomura. 

Additionally, the company stands to benefit from strong memory fundamentals sustaining capex and strong revenue outperformance through the first half of 2018, Shah said. Share gains in logic are likely to add 3-5 percent to top-line growth in 2018, the analyst said. 

Nomura is of the view that none of this is reflected in the consensus earnings per share estimate of $3.75 for the March quarter and $14.92 for the calendar year 2018.

The firm maintained its calendar year 2018 earnings per share estimate at $16.03.

The Price Action

Lam Research shares had a strong run in the year-to-dateperiod up until late November, but have pulled back slightly since then. Notwithstanding the recent weakness, the shares are up a solid 77 percent in 2017.

The shares were up 2.59 percent at $189 at the time of publication. 

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