Investidea: Lam Research, because you need plates

Investidea: Lam Research, because you need plates

Today we have a speculative idea: take stock of the manufacturer of equipment for the production of silicon wafers Lam Research (NASDAQ: LRCX), in order to capitalize on the growth in demand for their products.

Growth potential and validity: 14% behind 14 months excluding dividends; 10% per annum during 15 years including dividends.

Why stocks can go up: на продукцию компании есть спрос.

How do we act: we take shares now by 667,39 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.

And what is there with the author's forecasts

Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.

So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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What the company makes money on

Lam производит оборудование для производства чипов и оказывает услуги в этой области.

According to the company's annual report, по сегментам выручка делится так: 66,76% is equipment sales, and 32,24% - maintenance of this equipment.

According to the scope of its products and services are divided as follows:

  1. Память — 61%. Everything, related to information storage, the necessary technique for performing calculations.
  2. Silicon wafer manufacturing, needed for chips, — 32%.
  3. Логика — 7%. «Мозги» техники и производство интегрированных устройств.

Клиенты Lam — это в основном такие компании, how: Intel, Kioxia, Micron, Samsung Electronics, SK Hynix, Taiwan Semiconductor Manufacturing и Yangtze Memory Technologies.

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Revenue by country and region:

  1. China - 35%.
  2. Korea - 27%.
  3. Taiwan - 14%.
  4. Japan - 9%.
  5. USA - 6%.
  6. Southeast Asia - 6%.
  7. Europe - 3%.

Investidea: Lam Research, because you need plates

Arguments in favor of the company

Semiconductors! В мире большой спрос на чипы, they are missing, и потому их производство выгодно. Lam can count, that there will be a great demand for its products, because its chip-maker customers will be heavily invested in capital renewal.

But in the long run, the company's business looks good.: чипов современной экономике нужно все больше и больше.

Не нагло. Company P / E - 22.43 and P / S — 6,09 - it is generally not very expensive, And, Considering, that we can expect an increase in the company's revenue, there is room for further growth.

Wrecked. The company pays 6 $ dividend per share per year, which gives 0,9% per annum. But, Considering, that the payments go only 20,14% from the company's profits for the past 12 Months, there is a possibility, that some activist investor will force the company's management to increase payments three times. This is the theory, но ее следует учитывать.

What can get in the way

Concentration. According to the company's annual report, three unnamed customers account for a disproportionate share of revenue: 25, 12 And 10%. If Lam's relationship with one of them changes for the worse, this will have an extremely negative impact on its reporting.

Accounting. The company has approximately $9.745 billion in debt, of which 3.409 billion must be repaid during the year. Basically, the company has a lot of money: 4,042 billion in accounts and 3.397 billion debts of counterparties. But the company's large debts may prevent it from increasing its dividend., since she can decide to spend the accumulated money on expanding and modernizing her own production.

China. Considering, that the United States headed for the isolation of China, a problem for Lam could be its large share of sales in China. Probably, Lam will get some export permits from the US government, fortunately, most of her assets are in the States and the American state is not eager to ruin its own high-tech exporters. But still, Lam's high degree of dependence on sales in China cannot but worry.

What's the bottom line?

Shares can be taken now by 667,39 $. And then there are two options:

  1. wait, when stocks rise to 760 $. Think, we will reach this level in the next 14 Months;
  2. keep shares next 15 years, so that they grow with the company's business.
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