Lam Shrugs Off Micron’s Capital Expenditure Cut Plans with Strong Q4 Results and Q1 Outlook

Wide-moat Lam Research reported fiscal fourth-quarter results that came in ahead of our expectations. We note Lam and its peers have been dealing with supply chain constraints that have prevented equipment suppliers from fulfilling robust wafer fab equipment, or WFE, demand. Although Micron recently lowered its capital-expenditure outlook, Lam has benefited from greater exposure to foundry and logic chipmakers such as TSMC and Intel. Despite weaker PC and smartphone demand, Lam provided strong September quarter guidance, which we attribute to unfulfilled demand at logic/foundry customers. Looking ahead, we think WFE levels are likely to decline in 2023 mainly due to weaker memory capital expenditure spending. Our $720 fair value estimate is intact, and we think prospective investors should find current levels attractive based on Lam’s favorable long-term prospects.