Lam Research’s stock falls as analyst sees short-term slowdown

Lam Research Corp. shares fell Thursday after an analyst who is usually bullish said the semiconductor equipment maker’s near-term shipment outlook appeared to be facing challenges.

Lam  shares fell 5.7% to $188.35 at last check, after touching an intraday low of $184.81. Shares are up 2% for the year, compared with a 13% gain in the PHLX Semiconductor Index  and a 3% gain in the S&P 500 index

In a research note, Evercore ISI analyst C.J. Muse said his most recent channel checks suggest shipments for the June and September quarters are looking worse than expected. Muse said he expects shipments to decline 30% or more in those periods. The analyst has an overweight rating and a $300 price target on the stock, equal to 59% above its current trading level.

The reason for the decline appears to be related to production delays of 3-D NAND and DRAM memory chips at Samsung

3-D NAND is flash memory that layers multiple chips upon each other, building up rather than out, and DRAM, or dynamic random access memory, chips are the type of memory commonly used in PCs and servers.

“Good news – the pushouts speak to greater focus on profitability by memory makers, so we view this pause as only temporary,” Muse noted.

“Also, we do look for a recovery in NAND memory capex into the fourth-quarter 2018-first-half 2019 timeframe – so no change to our long-term thesis,” Muse said. “Bad news – this will likely weigh on sentiment for Lam until we get greater clarity on the magnitude of the decline.”

Lam is expected to report earnings in August. Muse now forecasts calendar 2018 earnings of $17 a share on revenue of $11.3 billion. Analysts surveyed by FactSet estimate calendar full-year earnings of $17.44 a share on revenue of $11.49 billion.

Of the 24 analysts who cover Lam, 22 have buy or overweight ratings and two have hold ratings, along with an average price target of $264.82.

Evercore’s Muse said what he’s hearing from Lam is worse than what he is hearing at Applied Materials Inc.  and KLA-Tencor Corp. Shares of Applied Materials fell 3.3% while KLA-Tencor shares declined 1.7%.