Lam Research Corp. (LRCX): Stronger outlook, with outperformance relative to peers driven by outsized etch/deposition exposure - Buy
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Goldman Sachs reiterates a Buy rating on Lam Research, raising the target price from $262 to $290 based on an unchanged 32x multiple applied to an updated normalized EPS estimate of $9.00. Although quarterly revenue of $5.841 billion broadly matched expectations, the company's fiscal second-quarter guidance significantly outpaced consensus, projecting revenue of $6.6 billion at the midpoint.
Management raised the 2026 wafer fabrication equipment spending forecast to approximately $140 billion, reflecting a 27% year-over-year growth rate. This robust expansion is driven by all major end-market segments, though domestic spending within China remains roughly flat. Importantly, 2026 spending may be constrained by cleanroom availability, suggesting that WFE is positioned for another strong year in 2027.
Goldman Sachs highlights that Lam Research is exceptionally well-positioned to outperform semiconductor equipment peers. The company maintains an outsized exposure to etch and deposition technologies, which are seeing increasing intensity from rising DRAM and foundry investments. Furthermore, its dominant share in NAND equipment upgrades, particularly driven by high-bandwidth memory advancements, provides a substantial competitive edge. Lam Research expects NAND spending to gain momentum through the second half of 2026, potentially extending into 2027 and 2028 via greenfield projects.
Goldman Sachs elevated its non-GAAP EPS estimates for 2026 through 2028 by an average of 15% to reflect higher revenue and sustained margin assumptions. Key downside risks to the thesis include a potential pause in NAND supplier upgrade spending, tightened US export restrictions, and any significant technological shift favoring lithography intensity over etch and deposition processes.