Lam Research Corporation (LRCX)
This past week on July 29th LRCX released their Q4 2015 earnings report. LRCX reported fourth-quarter fiscal 2015 non-GAAP earnings of $1.50 per share, which beat consensus by about 3 cents. Revenues of $1.48 billion increased 18.6% year over year. Revenues also beat the consensus estimates of $1.44 billion. This was the eighth successive quarter in which the company generated revenues in excess of a billion. The stock price initially responded positively, but has since lost all of the post announcement gains. The current stock price is $76.22 which is below our purchase price. In light of the positive earnings release I decreased some of the assumption percentages in the model, due to the great uncertainty surrounding the semiconductor industry. For example, there has been great consolidation through mergers and acquisitions in this industry, which increased the harshness of competition and the need to stay profitable and lean. Also, the future in general of the semiconductor industry is in question as no one knows what type of technology will be used next. Since LRCX manufactures and services semiconductor equipment, if they choose the wrong equipment, they could lose their market share in the industry. The price target before the Q4 update was $96.55, now the current price target is $87.66.