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On Thursday, JPMorgan analysts adjusted their outlook on Lam Research (NASDAQ:LRCX), reducing the price target to $95 from the previous $110 while maintaining an Overweight rating. The revision comes despite Lam Research’s robust March-quarter earnings, which surpassed expectations, and a June-quarter guidance that indicates continued strong performance. According to InvestingPro data, the company maintains strong financial health with a current ratio of 2.54 and an impressive gross margin of 47.73%, suggesting operational efficiency.
The positive outlook for the June quarter is attributed to several factors, including advancements in foundry/logic technology, NAND technology shifts to 200+ layers, DRAM transitions, and momentum in advanced packaging. Lam Research’s growth is expected to be fueled by these technology inflections and the demand for NAND upgrades. With revenue growth of 13.21% in the last twelve months and a PEG ratio of 0.74, InvestingPro analysis suggests the stock is trading at attractive valuations relative to its growth potential. Subscribers can access 12 more exclusive ProTips and comprehensive valuation metrics. The company’s management team has expressed confidence that there will not be any significant shifts in near-term technology investments by customers, despite potential medium-term effects from tariffs and trade dynamics.
Despite the favorable near-term prospects, JPMorgan’s analysts foresee a potential downturn in demand affecting the semiconductor and semiconductor capital equipment (semicap) industries in the second half of 2025, due to the aforementioned trade issues. This could result in flat to slightly declining wafer fabrication equipment (WFE) spending for the year, with estimates around $97 billion.
Lam Research’s strong positioning in DRAM, foundry/logic, and NAND technology upgrades is still expected to allow the company to outperform in the WFE market. The company reported a significant increase in gross margin to 49% in the March quarter, which was attributed to a combination of an agile supply chain, proximity to customers, and benefits from a new facility in Malaysia.
Revenue from China remained consistent at 31% in the March quarter, but Lam Research anticipates a decline in the second half of 2025 due to export restrictions that were announced in December. These restrictions are expected to primarily affect the company’s Reliant business, leading to flat revenue projections for the Customer Support Business Group (CSBG) for the year.
In light of these developments, JPMorgan has revised its revenue and EPS estimates for Lam Research for 2025 downward, while also introducing initial estimates for 2026. Despite the reduction in the price target, JPMorgan’s analysts continue to see Lam Research as a strong investment opportunity, with significant potential upside from its current stock price level. InvestingPro data shows the company has maintained dividend payments for 12 consecutive years with a 15% dividend growth rate, demonstrating strong shareholder returns. For detailed analysis including Fair Value estimates and comprehensive financial health scores, investors can access the full Pro Research Report, available exclusively to subscribers.
In other recent news, Lam Research Corp reported its Q1 2025 earnings, surpassing both earnings per share (EPS) and revenue forecasts. The company achieved an EPS of $1.04, exceeding the forecasted $1.00, and generated $4.72 billion in revenue, surpassing the expected $4.63 billion. This marks the second consecutive quarter where Lam Research has exceeded expectations and raised future guidance. Evercore ISI responded to this strong performance by raising its price target for Lam Research from $95.00 to $99.00, maintaining an Outperform rating on the stock. Meanwhile, Berenberg reiterated its Buy rating on Lam Research, with a price target of $90.00, despite ongoing concerns about potential impacts from recent tariff changes. The company remains confident in its growth prospects and has not altered its wafer fabrication equipment capex estimates for 2025. Lam Research’s focus on technological advancements, such as upgrades for 200+ layer NAND and advanced packaging, positions it well to benefit from industry trends. The company’s guidance for Q2 2025 projects revenue of $5 billion ± $300 million, indicating continued confidence in its operational capabilities.
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