Lam Research (LRCX - Free Report) is a global supplier of wafer fabrication equipment and services for the semiconductor industry. The firm topped our Q4 fiscal 2020 estimates at the end of July. And its outlook and dividend might help make it an attractive investment, especially with it resting well off its recent highs.
The Simple Pitch...
Lam Research’s operates a vital business within the ever-expanding chip space. The firm is part of our Semiconductor Equipment - Wafer Fabrication industry that ranks in the top 1% of our over 250 Zacks industries. LRCX’s fourth quarter sales jumped 18% to help lift its overall FY20 revenue by 4%, which helped it start to bounce back from a 13% decline in FY19.
Lam Research’s outlook is strong within the cyclical chip space, with its FY21 EPS estimates up 21% and FY22 up 9% since its fourth quarter report. The firm’s bottom-line positivity helps LRCX earn a Zacks Rank #1 (Strong Buy) right now.
Our current Zacks estimates call for LRCX’s adjusted fiscal 2021 EPS figure to surge 30% on 24% stronger sales. The firm is then projected to follow up this expansion with another 15% earnings growth in FY22 and 10% higher revenue.
Investors might also be pleased to note that LRCX in early March announced what it calls the most “innovative etch product that has been developed in the last 20 years.” The new Sense.i platform is designed to help produce finer 3D details on chips amid ever more complex smartphones and devices.
On top of that, Lam Research announced on August 27 that it boosted its quarterly dividend by 13%, which pushes its yield up to 1.52% to top its industry’s 0.98% and nearly match the S&P 500’s 1.62%. The next dividend payment will be made on October 14 to shareholders of record on September 30.
Despite the new dividend and its outlook, LRCX is down 10% in the last month after it hit new highs in early August. This might set up a better buying opportunity for those high on the stock, especially when investors take into account its longer-term performance.
LRCX is up 100% in the last two years to crush the broader tech industry’s 25%, Applied Materials’ (AMAT - Free Report) 45% and Taiwan Semiconductor’s (TSM - Free Report) 86%. And the nearby chart highlights an even more impressive run over the last five years.
On top of that, LRCX trades at a significant discount against its industry, as it has for years. The stock is currently trading at 3.9X forward 12-month sales vs. 7.1X. This also marks a discount to its own year-long highs of 4.9X, as it rests at its median during the past 12 months.
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