Lam Research stock rating downgraded by KeyBanc as shares exceed target

Investing.com - KeyBanc Capital Markets downgraded Lam Research (NASDAQ:LRCX) from Overweight to Sector Weight on Tuesday, citing the semiconductor equipment manufacturer’s recent stock price performance. According to InvestingPro data, LRCX has delivered impressive returns of 75% over the past six months, with the stock currently trading near its 52-week high.

The downgrade comes after Lam Research shares exceeded KeyBanc’s price target within the past week and significantly outperformed peers year-to-date, with notable acceleration in the last month. InvestingPro analysis indicates the stock is currently trading at an elevated EV/EBITDA multiple of 26.35x, suggesting rich valuation levels. Get access to over 20 additional exclusive ProTips and comprehensive valuation metrics with InvestingPro.

KeyBanc attributed the stock’s strong performance to increasing investor optimism toward memory end markets, more favorable views on Lam’s competitive positioning ahead of several market inflections, and general optimism from artificial intelligence-related announcements from Oracle, Nvidia/Intel, and Samsung.

Despite the positive sentiment, KeyBanc noted it doesn’t expect a corresponding increase in consensus expectations or actual earnings power in the immediate future, a situation the companies themselves acknowledged during the second-quarter earnings season.

The firm expressed concern that the share price increase has been driven more by multiple expansion than incremental earnings growth, potentially putting the sustainability of the current stock price at risk.

In other recent news, Lam Research has been in the spotlight with several key developments. The company has maintained its Buy rating at Stifel, which noted improvements in hyperscaler forecasts that could positively impact Lam Research’s position in the memory market. Meanwhile, Cantor Fitzgerald has raised its price target for Lam Research to $120 from $115, maintaining a Buy rating after meetings with the company’s management. The firm’s outlook suggests optimism about Lam Research’s competitive positioning and new product platforms.

Conversely, Morgan Stanley downgraded Lam Research from Equalweight to Underweight, citing a slowing growth outlook. The firm projects a significant deceleration in Lam’s growth drivers in China and the NAND memory markets. Erste Group has initiated coverage on Lam Research with a Buy rating, citing the company’s growth in the specialized semiconductor wafer manufacturing equipment sector. Additionally, Lam Research saw a stock increase alongside other companies like Sandisk and Western Digital, following new export regulations affecting memory chip production in China. These developments collectively highlight the dynamic environment surrounding Lam Research in recent times.

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