← Back

In One Chart - January 24, 2019

In One Chart: Lam Research ($LRCX) Leads Chipmakers Higher

Followers of the semiconductor manufacturing industry know that 2017, in which the iShares PHLX Semiconductor ETF (SOXX) gained 39.8%, was a very good year. Conversely, 2018 was a bad year, with SOXX falling 6.5%.

Less than a month into 2019, positive earnings and cautiously optimistic management guidance have analysts believing this year will be a good one for chipmakers.

Shares of Lam Research Corp (LRCX), a manufacturer of equipment used to fabricate semiconductors, surged Thursday after reporting fiscal second quarter (ending December 2018) earnings of $3.87 per share, beating the $3.67 consensus forecast convincingly. While that is a 10.8% decline year-over-year, EPS increased 15.2% over the prior quarter.

Couple healthy earnings with the announcement of a $5 billion stock buyback and shares in Lam Research have risen nearly 14% Thursday alone.

The chart below shows year-to-date gains for Lam Research, peers Applied Materials Inc (AMAT) and Advanced Micro Devices Inc (AMD), and the iShares PHLX Semiconductor ETF.

Funnily enough, ahead of Lam Research’s earnings release Wednesday night, analysts voiced concerns regarding two of Lam’s key customers, Samsung Electronics and Micron Technology (MU). Each company accounts for over 10% of Lam Research’s revenue according to Bloomberg Supply Chain data. Earlier this month, Samsung Electronics missed on earnings and Micron Technology reported that it had cut capital spending.

When combining the above concerns with some previously held sentiments that demand for semiconductors would continue to slow in 2019, Lam Research’s earnings surprise was truly that — surprising.

Lam Research CEO Tim Archer is quoted saying: “[W]e are still in the early stages of a long-term secular growth story for the industry and particularly for Lam.” Industry analysts share Archer’s sentiments and highlight that managers have been dovish with recent reports.

Benefitting from Lam Research’s positive results is Intel Corp (INTC). Midday Thursday, Intel is up more than 3%, suggesting chipmakers really have found a bottom and are poised for a good year.

Stay up to date,
subscribe to the YCharts blog