Lam Research (LRCX:NASDAQ) $718.49

Gain to date: 92%

The mood is changing around microchips, where oversupply issues may have peaked and demand is getting back on the front foot. 

Microchips kit maker Lam Research (LRCX:NASDAQ) hinted at the importance of both factors in its latest quarterly results, reporting better-than-expected figures. Its shares have nearly doubled in price since we said to buy last October.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

In its fourth quarter results to 25 June, Lam Research generated $3.21 billion revenue, down 31% year-on-year and 17% sequentially. Earnings per share declined by about 1% to $5.98. While that may seem disappointing, it was much better than forecast. Analysts expected $3.16 billion revenue and $5.11 earnings per share.

Also pleasing investors was optimistic commentary from Lam Research and current quarter guidance above market projections.

‘While 2023 is a down year [for wafer fabrication equipment], the long-term dynamics for the semiconductor industry are strong,’ said Lam Research chief executive Tim Archer, noting that the world is still in the early stages of adopting new technologies such as artificial intelligence, and that he expects the wave to continue over the next few years.

Management guided for $3.4 billion revenue and $5.82 earnings per share in the current quarter, above analyst expectations of $3.3 billion revenue and $5.54 earnings per share.

Semiconductor equipment peers like ASML (ASML:AMS), KLA (KLAC:NASDAQ), Analog Devices (ADI:NASDAQ) and Tokyo Electron (8035:TYO) have been making similarly bullish comments.

WHAT SHOULD INVESTORS DO NOW?

Is it boom time again for chips and chips kit makers? Let’s not get carried away, there are still huge challenges ahead, not least the ongoing tech battlefield between Washington and Beijing.

Lam Research’s share price is close to all-time highs and is trading on a mid-teens 2024 price to earnings multiple. This gives us pause, and we believe investors who have enjoyed this latest rally show book some profit.

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