Analyst Note| Abhinav Davuluri, CFA |
Wide-moat Lam Research reported fiscal fourth-quarter results that came in ahead of our expectations, led by sales to NAND and foundry chipmakers. We appreciate that Lam has become more diversified in end-market exposure, whereas historically Lam’s equipment sales were more memory-centric. Based on large capital expenditure budgets at TSMC and Intel as well as improved memory spending, we now think the wafer fab equipment market will be up 30% in 2021 (up from 20%). After incorporating Lam’s guidance for the September quarter ($4.3 billion in revenue at the midpoint) and positive outlook for calendar 2021, we raise our fair value estimate to $640 per share from $600. Shares look modestly undervalued at current levels.