Lam Calls for Sharply Lower 2023 WFE Levels As Memory Weakness and China Restrictions Take Hold

Wide-moat Lam Research reported fiscal first-quarter results that came in ahead of our expectations, thanks to strong foundry and logic demand and slightly better supply chain conditions. Management expects calendar 2023 wafer fab equipment, or WFE, spending to be down over 20% year over year primarily due to weaker memory investments and the latest export restrictions to China. Specifically, the negative revenue impact from the restrictions is expected to be in the range of $2 billion to $2.5 billion. These assumptions are consistent with our recent model update and factored into our unchanged fair value estimate of $620 per share. We think prospective investors should find current levels attractive based on Lam’s favorable long-term prospects.