GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Lam Research is cheap against its earnings, trading at 30x next year's earnings when chip-equipment makers usually get 38x. Fair value is $392.57 to $499.63, or 38x next year's $11.74 EPS give or take 12%, so at $347.49 it trades 11% below where fair starts. The valuation leans on the forecast, with forward EPS 100% above trailing. This is a levels-only read off reported earnings and revenue estimates, with no fundamental work. x.comÂ
Lam Research's non-China demand growth and steady earnings estimates make its lower multiple a rebound setup if its guide holds. China's revenue share fell from 43% to 26% as Taiwan and Korea grew, while the fiscal 2027 earnings multiple fell from about 37x to 28x on nearly unchanged estimates. An in-line quarter and December guide near consensus would probably lift the stock; a guide below $8.5bn would back the selloff. x.comÂ
Lam Research's record results suggest the equipment cycle is not ending despite its stock selloff. Revenue reached $8.22B, up 54% year over year and over 20% sequentially, while EPS rose 75%; ASML and TSMC also report customers needing more tools. Overweight with a $355 target and 35% upside, but the selloff is a gift only if Lam guides December higher. x.com x.comÂ
Lam Research's valuation is scary, at 73 times earnings, a PEG ratio of 2.16 and 82 times free cash flow. x.comÂ
Lam Research's strong revenue and free-cash-flow forecasts remain intact despite the selloff, suggesting upside if it delivers. Consensus puts fiscal Q1 revenue at $8.13B; FY2027 revenue is expected at $34.92B, with free cash flow potentially near $10B at a 28.33% margin. Analysts' $375.81-$378.20 targets imply 42.8% upside from $263.94 if FCF forecasts hold. Q1 execution is critical to show whether AI capex strength is translating into cash. x.comÂ
Chip-equipment makers look cheap given supply-chain shortages and demand visible toward 2029-30. At Semicon West, no one raised demand concerns; suppliers' suppliers lacked capacity, while several high-quality names trade below the S&P multiple. Per Lynx's KC, customers are asking about delivery three to four years out. For Lam Research's report, bottlenecks, pricing and visibility beyond 2027 matter more than demand. x.com x.comÂ
Semiconductor equipment makers such as Applied Materials, KLA and Lam Research look like shorts, a view Michael Burry now shares: per @zerohedge, Burry says he shorted Applied Materials, along with Tesla, Nvidia and, for the first time, Caterpillar. x.comÂ
Semiconductor and memory stocks still look cheap despite the panic on forward earnings and growth-adjusted valuations. SK hynix trades at 4.4x forward earnings with a 0.04 PEG, Micron at 4.6x and 0.11, Sandisk at 5.5x and 0.10, and Nvidia at 14.2x and 0.22; the table extends across chipmakers and suppliers. Some of these figures may reflect peak earnings. x.com x.comÂ
The Nasdaq 100 already effectively prices in a severe semiconductor recession. QQQ trades at about 20 times 2027 EPS versus a 10-year average forward P/E near 25; halving 2027 estimates for Nvidia, Broadcom, AMD, Micron, Lam Research and Applied Materials would lift that only to 24.5. If the market instead traded at 20 times in that scenario, downside would be about 20%. Capex seems unlikely to be cut materially unless growth at AI labs such as Anthropic decelerates dramatically. x.comÂ
Semiconductors are now cheaper than the broader market on forward earnings, provided earnings cuts do not undermine that discount. The sector's forward P/E is about 17 versus roughly 18.6 for the S&P 500. x.comÂ
Semiconductors look relatively cheap against the S&P 500, while their earnings are growing much faster, barring an EPS reset. The selloff looks overdone, though that does not mean it reverses tomorrow. x.comÂ
