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Lam Research announced a new $25 billion plan to buy back its own stock, alongside its regular quarterly dividend. A buyback is when a company uses its cash to purchase its own shares from the open market, which reduces the total number of shares and makes each remaining share worth a larger piece of the business.
This is a significant commitment that represents about 10 percent of the company's total market value. It signals that management believes the business is generating more cash than it needs for its own operations and that the current stock price is a good value for the company to invest in itself.
Source: PRNewsWire
Orders for core capital goods, which track business spending on equipment like the machines Lam Research builds, grew in September. Shipments also picked up speed, suggesting that industrial demand remained steady through the third quarter.
This is a helpful sign for Lam because it shows that despite high interest rates, large companies are still willing to spend on the expensive hardware needed to upgrade their factories and data centers. As a primary supplier for chip manufacturing, Lam relies on this broad appetite for high-end equipment to keep its own order book full.
Source: Reuters
Needham cut its price target from $390 to $290 while keeping a buy rating on the stock. This adjustment follows a week where several other analysts also lowered their targets, bringing the average across all firms to about $376. Even with the lower target, the firm still sees significant room for the stock to rise from its current price of roughly $239. These tweaks are common after earnings as analysts align their models with the company's latest outlook, but the underlying view that the business is worth more than its current market price remains unchanged.
Source: Needham
After Lam Research reported its October results, we updated our fair value. We raised our rating from Watch to Buy because the company kept more than 40% of its sales as operating profit, which is a new and higher level for this business. We have added the risk of tighter export controls on high-end tools from Taiwan to what we track. We also increased our projection for revenue from systems sales after they grew 62% over the past year.
Lam Research reported revenue of about 8.22 billion dollars for the quarter, which was slightly ahead of what analysts expected. Profits also came in higher than predicted at 2.20 dollars per share. The company makes the machines that etch and deposit materials onto silicon at an atomic level, a process that is becoming more complex and valuable as chips move from flat designs to vertical stacks.
This growth suggests that the transition to high-bandwidth memory and advanced AI chips is translating into real orders for Lam's equipment. While the stock has been under pressure lately, these results show the underlying business remains highly profitable, with operating margins reaching 40 percent. For long-term owners, the focus remains on whether this demand can stay strong enough to justify the company's current valuation.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Management consistently sets a bar they can clear, beating their own targets for eight straight quarters while the business outpaces even bullish forecasts.
| Expectation | |
|---|---|
| EPS | $2.34 |
| Revenue | $8.63B |
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