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On Thursday, Susquehanna analysts upgraded Lam Research stock (NASDAQ:LRCX) from Neutral to Positive, significantly increasing the price target to $125 from the previous $75. The upgrade comes as a response to several key factors that indicate a positive outlook for the company. According to InvestingPro data, 24 analysts have recently revised their earnings estimates upward for the upcoming period, reflecting growing confidence in the semiconductor equipment manufacturer, which currently commands a market capitalization of $112.76 billion.
The analysts highlighted the strategic expansion of Lam’s serviceable available market (SAM), which was detailed during the company’s Analyst Day. This expansion is not only expected to diversify Lam’s revenue across different device types but also positions the company to benefit from any potential recovery in Samsung (KS:005930)’s Memory business by the end of 2025. Samsung remains one of Lam’s top three customers, and improvements in its Memory sector are anticipated to contribute to Lam’s growth above the wafer fabrication equipment (WFE) industry average. The company’s strong market position is reflected in its impressive 13.21% revenue growth over the last twelve months, as reported by InvestingPro.
Another aspect contributing to the upgrade is the transition within the NAND industry to architectures with more than 200 layers. Lam Research is poised to capitalize on this shift through upgrades, which is a critical part of their growth narrative. Additionally, the analysts noted Lam’s scaling operating framework, which is likely to drive operating margin (OM) expansion. The company’s financial health score of "GOOD" on InvestingPro supports this outlook, with robust profitability metrics including a 47.73% gross profit margin.
The analysts also expressed enthusiasm regarding Lam’s financial strategy, particularly the 30% free cash flow (FCF) margin target. They underscored the company’s commitment to returning the majority of this to shareholders. It was also mentioned that Lam Research has over $9 billion in buyback authorization, which could lead to an approximate 8% earnings per share (EPS) accretion, based on the current share price.
The upgrade by Susquehanna reflects a confidence in Lam Research’s strategic initiatives and financial policies, which are expected to yield positive results for the company and its investors.
In other recent news, Lam Research has been the focus of analyst attention and strategic developments. KeyBanc Capital Markets increased their price target for Lam Research from $95 to $105, maintaining an Overweight rating. This follows the company’s ambitious plan to double its revenue and earnings per share by 2028, with projections of $26 billion in revenue and $6.50 EPS. Citi also reiterated its Buy rating with an $87 target, expressing optimism in Lam Research’s growth trajectory, particularly in expanding its serviceable available market (SAM) in the semiconductor industry.
Lam Research recently introduced two new tools, ALTUS Halo and Akara, aimed at enhancing AI chip production, positioning the company competitively in the semiconductor equipment market. The ALTUS Halo tool incorporates molybdenum to improve chip performance, while Akara focuses on precise etching for semiconductor wafers. These innovations align with the company’s strategy to capitalize on technological inflections and AI data center investments.
Additionally, Lam Research’s recent investor day highlighted a financial model projecting revenues between $25 billion and $28 billion by 2028, with adjusted earnings per share of $6 to $7. This event marked the first update in five years and emphasized the company’s plans to outpace industry growth and expand its Customer Support Business Group. Analyst feedback suggests confidence in Lam Research’s ability to maintain its positive performance amid evolving market dynamics.
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