Lam Research Trades at a Discount and Its Risk Is Low. It’s Been Added to Citi’s Focus List.
An employee makes a chip at a factory.
AFP via Getty Images
Semiconductor manufacturer Lam Research , down more than 25% in 2022, was added to Citi’s U.S. Focus List based on valuation and the stock’s low risk.
Analyst Atif Malik added Lam Research (ticker: LRCX
) to the bank’s U.S. Focus List, a designation reserved for stocks are attractive based on valuation, estimated total return, consensus crowding and risk-reward.
The stock has fallen this year after a few earnings misses due to a sub-system supplier issue, Malik wrote in a research note on Friday. Investors also have been wary of flat margins and a postponement of a transition to a new transistor that would help grow foundry sales.
But the contraction could be mostly played out, and could in fact be an opportunity for investors, given that the stock is trading at a significant discount to peers, such as Applied Materials ( AMAT
), and KLA Corp. ( KLAC
), Malik said.
In addition, there could be a few near-term catalysts for the stock, he added. For one, margins could improve as the company ramps up production in its new Malaysia factory. He also believes memory sales fundamentals could improve as prices for NAND memory chips increase.
The analyst maintained a Buy rating on Lam Research, calling it a “good stock play on memory recovery” during the second half of 2022. A risk to his bullish take could be if memory demand is weaker than expected, especially if demand from China slows down, he said.
Of the 29 analysts covering the stock, 20 rated it a Buy or Overweight, and nine rated it a Hold.
Shares of Lam Research were rising 2.2% to $537.81 on Friday.
Write to Sabrina Escobar at [email protected]
