Lam Research Positioned For Growth Amid NAND Recovery And Advanced Packaging Strength, Analysts Highlight China Risks

BofA Securities analyst Vivek Arya reiterated the Buy rating on Lam Research LRCX, raising the price forecast to $92 from $88.

Arya expresses confidence in Lam Research’s leverage to key tech trends, its strong exposure to a NAND recovery, and solid free cash flow generation.

However, the analyst notes that while China is expected to normalize to 30% of the mix in December, ongoing risks from export controls remain, and gains in gross and operating margins appear limited.

The analyst raises the earnings estimates for 2025 and 2026 by 4% and 7%, respectively.

The analyst writes that the company’s unique portfolio will help it outperform its competitors in 2025, despite concerns about ASML Holding N.V outlook.

Also Read: ASML Stock Plunges Further On Lower 2025 Sales Outlook: Analysts Break Down Semiconductor Challenges

Arya notes that recent high shipments of lithography tools to China might lead to a bigger correction there, but Lam Research is less affected by this due to its strengths in advanced technologies like NAND and packaging.

Overall, Lam Research has several growth opportunities in 2025, even with potential challenges in China and delays from Intel and Samsung.

Meanwhile, Goldman Sachs analyst Toshiya Hari reiterated the Buy rating on Lam Research, lowering the price forecast to $96 from $102.50).

The analyst highlights that advancements in NAND, leading-edge foundry/logic, and DRAM will increase demand for etching and deposition, helping Lam gain market share in wafer fabrication equipment (WFE) in 2025 and beyond.

The analyst notes that while ASML lowered its 2025 revenue guidance due to weak demand in leading-edge foundry and potential declines in Chinese spending, Lam Research maintained its forecast of a mid-$90 billion WFE market for 2024.

In fact, Lam Research expects WFE spending to grow in 2025, driven by changes in NAND technology and ongoing strength in DRAM, HBM, and leading-edge foundry sectors, the analyst adds.

Hari notes, Advanced Packaging, essential for AI technology, will boost Lam Research’s performance.

Additionally, in the Systems business, China’s share of total revenue decreased to 37% in the September quarter from 42% in the March quarter and 39% in the June quarter.

Per Hari, the market will perceive the guided decline in China contribution positively, given the tendency for the market to pay a below-average multiple for revenue streams generated in China.

According to Hari, the market is likely to view the expected decline in China’s contribution positively, as it typically assigns a “below-average” multiple to revenue generated in China.

Price Action: LRCX shares are trading higher by 4.87% to $76.41 at last check Thursday.

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