Lam Earnings: Chip Softness Still Affecting Results, but We’re Glad to See Rebounding DRAM Sales

We maintain our $620 fair value estimate for shares of wide-moat Lam Research after it reported fiscal first-quarter results largely in line with our expectations. Lam posted a good quarter, in our view, considering the ongoing hefty headwinds in the memory chip markets that have weighed on sales. It raised its wafer fab equipment, or WFE, industry outlook for calendar 2023, and management said recently heightened U.S. export restrictions to China shouldn’t have an incremental impact. We continue to see Lam as a dominant force in etch and deposition for chipmaking and believe it is set to benefit from secular trends toward denser and more complex chips over the long term. Shares fell about 5% after the release, in our view due to continued weakness in NAND memory. We see shares as fairly valued.