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Investing.com - Morgan Stanley downgraded Lam Research (NASDAQ:LRCX), a prominent player in the Semiconductors & Semiconductor Equipment industry with a market capitalization of $126.75 billion, from Equalweight to Underweight on Monday, while slightly lowering its price target to $92.00 from $94.00. According to InvestingPro data, the company currently appears slightly overvalued based on its Fair Value analysis, despite maintaining strong financial health with a "GREAT" overall score.
The downgrade reflects Morgan Stanley’s projection that Lam’s growth drivers in China and NAND memory markets will slow significantly after two strong years in 2024-2025, with system shipment growth expected to decelerate from 82% in 2025 to just 3% in 2026. This forecast comes despite Lam’s impressive revenue growth of 23.68% over the last twelve months. Want deeper insights? InvestingPro offers 15+ additional tips and comprehensive analysis for LRCX.
Morgan Stanley acknowledges Lam’s strong performance in the NAND segment, where the company has gained 25 percentage points of market share over the past decade, but notes that end-markets lack the robustness needed to drive further growth for both Lam and the NAND wafer fabrication equipment (WFE) sector.
China Logic, which has been Lam’s biggest growth driver since 2021 as the company expanded regional market share, is expected to slow dramatically from 37%/35% year-over-year growth in 2024/2025 to just 3% growth in 2026, according to the investment bank.
While Morgan Stanley projects 8% growth in non-China logic driven by TSMC, the slowdown in NAND and China markets—which represent 54% of Lam’s shipments—will limit total shipment growth, potentially causing Lam’s relative share performance to lag. With a beta of 1.66, investors should note that LRCX stock movements tend to be quite volatile. For comprehensive valuation metrics and detailed growth analysis, check out the in-depth LRCX Research Report available on InvestingPro.
In other recent news, Lam Research has reported quarterly results that exceeded expectations, with revenue surpassing both Stifel’s and consensus estimates. The company also provided guidance for the September quarter, projecting $5.20 billion in revenue, which is higher than analysts’ estimates of $4.7 billion. Following these strong results, several firms have raised their price targets for Lam Research. Mizuho increased its price target to $120, citing a better outlook in China, while Stifel and Needham both raised their targets to $115, noting robust performance and increased demand in China. Cantor Fitzgerald also adjusted its price target to $120, maintaining a Buy rating and highlighting the company’s competitive positioning and new product platforms. Erste Group initiated coverage with a Buy rating, emphasizing the company’s growth prospects in the specialized semiconductor wafer manufacturing equipment market. These developments reflect a positive sentiment among analysts regarding Lam Research’s future performance.
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