Goldman Removes Lam Research From Conviction Buy List

We are removing Lam Research LRCX from the Americas Conviction Buy List as the recent run-up in the stock leaves the risk/reward more balanced. LRCX is now trading within 10% of our $53, six-month price target, with the shares +34% since being added to the Conviction List on 6/23/08 vs. the S&P 500 -7%, and +42% yoy vs. the S&P 500 +14%. In addition, CY2011 Street estimates are up 40% since mid-July and are now much closer to our CY2011 EPS estimate of $6.00. Goldman maintains its Buy rating given a bullish view on the SPE cycle and Lam's significant earnings generation relative to peers. It believes there is increased evidence that 2011 capex will be at least flat yoy as several of the large industry players have already made at least directional comments regarding their 2011 capex budgets. Micron guided FY2011 capex +221% to +288% yoy. TSMC guided 2011 capex up yoy. UMC commented that capex could stay strong in 2011. Hynix guided for 2011 capex to remain at a similar level to 2010. And Intel announced significant spending on new facilities over the next several years. As a result, we believe that it is now less likely that capex will be down yoy as the Street expects, and see orders to the SPE makers, including Lam, moving higher in 1H2011. Goldman Sachs has a $53 Pt on LRCX LRCX closed Monday at $48.37