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Bull of the Day: Lam Research (LRCX)

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Lam Research (LRCX - Free Report) delivered the goods on April 18 that I had been telling you about for two months in articles like "Give Me Sales Growth!" on February 25 and "3 Tech Stocks to Buy on This Pullback" from April 12.

Here's what I told my TAZR Trader group, where we first bought LRCX under $115 in mid-February, after Lam reported earnings last week...

Another quarter, another round of schooling the recalcitrant bears who want to short semiconductors just because the stocks have run so hard in the past year. According to the Merriam-Webster dictionary...

The origins of lambaste are somewhat uncertain, but the word was most likely formed by combining the verbs lam and baste, both of which mean "to beat severely." (Incidentally, lambaste can also be spelled lambast, despite the modern spelling of the verb baste.)

The Earnings Trifecta

Lam Research (LRCX - Free Report) delivered the earnings "trifecta" we love: top and bottom line beats and raised guidance!

We don't really want to harm recalcitrant bears. But we don't mind severely beating Wall Street estimates.

At last glance around 6pm ET, LRCX shares were up over $6 (+4.75%) on heavy short-covering volume of 450K. Here were the details...

Revenue in the March quarter climbed to $2.154 billion, yielding EPS of $2.80.

Analysts had been modeling $2.125 billion on the top and $2.55 on the bottom, for a 1.35% sales beat and a 10% EPS beat.

For the current quarter, the company sees revenue of $2.2 billion to $2.4 billion, and EPS of $2.88 to $3.12, topping consensus of $2.19 billion and $2.65 per share.

Stifel analyst Patrick Ho, a big LRCX bull who commented positively ahead of earnings, was quick to offer commentary afterwards.

Ho noted that Lam reported 2017 Q3 beats driven by strong shipments to Korea and Taiwan. Since he probably needs time to digest management's upgraded outlook for the year before he adjusts his earnings model, he would only reiterate his $150 price target tonight.

But we should expect many analysts to raise estimates in the coming days.

(end of April 18 TAZR commentary)

Analysts Catching Up to the Growth

The next day, I delivered several of those updates from analysts to my group...

Let's see what most of Wall Street analysts had to say today after discovering even they were behind the earnings power of LRCX...

First, our first steadfast bull Stifel analyst Patrick Ho had a chance to reflect on the raised guidance and boosted EPS estimates this morning. He reiterated his Buy rating on shares of Lam Research and raised his price target to $170. The new PT is based on 15x FY18 (June) pro-forma EPS of $10.35, plus ~$15 in net cash per share.

The analyst stated "Lam was tracking generally on plan (actually, better than expected) for 1H17, driven by 3D NAND and a mix of DRAM and leading edge foundry."

Our second steadfast bull, Pacific Crest analyst Weston Twigg, raised his price target on Lam Research to $180 from $163 while maintaining an Overweight rating.

Twigg said "Lam appears positioned to meaningfully outgrow the overall equipment market in 2017 as 3D NAND, where Lam is very well positioned, is likely to become the largest segment. Lam noted that it now has a stronger demand view for 2017 than in last quarter, with the increased conviction coming two-thirds from NAND and one-third from logic."

Needham & Company raised its price target on Lam Research to $165 from $145 while maintaining a Buy rating. While noting LRCX's 3Q17 report was solid with an improved outlook for the year, the Needham analyst believes that the industry is in a period of sustainable growth and as estimates increase, Semi stocks should continue to grind higher.

Cowen reiterated an Outperform rating and $150 price target on Lam Research following their industry analysis. For LRCX, the improved C2H outlook now sets a path implying ~$12 EPS for C2017. Analyst Timothy Arcuri observed that the beat and raise suggests the company is poised for continued growth with secular trends as tailwinds.

RBC Capital analyst, Amit Daryanani, reiterated his Outperform rating on shares of Lam Research and raised his price target to $145 from $140 after the company reported another "impressive beat/raise print".

What's interesting about the RBC move is that they were basically "Neutral" on the company before this report.

(end of my April 19 TAZR update)

Since last week, other analysts have joined the chorus of singing Lam's praises. And the stock has soared from $127 to $146, inviting us to take some quick profits but holding on to some shares for further new highs I expect this quarter.

Disclosure: I own LRCX for the Zacks TAZR Trader service.

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