Chip Equipment Stock Lam Research Faces a Reckoning, According to Analyst

Lam Research is scheduled to report its results for the June quarter on Wednesday.


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Makers of gear for semiconductor manufacturing are in line for trouble in terms of earnings, according to Barclays.

On Monday, semiconductor analyst Blayne Curtis lowered his stock-price target for



Lam Research

(ticker:



LRCX

), a maker of memory-chip equipment, to $450 from $625, citing a softening market for those chips. He also downgraded his rating to Equal Weight from Overweight on the stock.

Lam shares fell 2.5% to $452.41 in early trading following the report.

It is “hard to see [



Lam Research

] working with memory cuts,” he wrote. “Semi cap companies continue to signal growth next year, but this seems highly unlikely given the Memory cuts we’ve already seen and our view on where the overall semi market is headed.”

Lam Research is scheduled to report its June quarter earnings on Wednesday. The company didn’t immediately respond to a request for comment on the analyst note.

The analyst now forecasts market-wide sales of wafer-fabrication equipment will decline by 11% to $83 billion next year. He had previously predicted sales would be $99 billion. He believes earnings estimates for chip companies could drop by 30% to 40%, meaning stocks in the sector would still be “expensive” relative to forecasted profits even after their drops this year.

“We are not buyers of the recent bounce and think Semis are still in for a substantial reset,” he wrote.

Lam shares have rallied 6% this month, but are still down by 37% this year. The



iShares Semiconductor ETF

(SOXX), which tracks the performance of the ICE Semiconductor Index, has fallen 29% so far in 2022.

Last month, memory chip maker



Micron Technology

(



MU

) issued a forecast for the quarter ending in August that fell short of Wall Street’s estimates by nearly 40% because of weakening demand in the PC and smartphone markets.

Write to Tae Kim at tae.kim@barrons.com

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