I Think Lam Research Corp Is Wrong

rollandthomas (74)in #money • 8 years ago

When I want to know where the chip sector is heading, I look to the chip equipment makers to give me clues.

Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits worldwide. This past week, they announced first quarter numbers. Lam Research bear the numbers and give a positive guidance for the subsequent quarter.

"We continue to see strength in the China region with 25% of our revenue being generated there. The strength in China came from both foundry as well as memory," Lam CEO Martin Anstice said on Tuesday's earnings call. "Nearly two thirds of the revenue in September came from domestic Chinese customers.”

"There has been more semiconductor capital investment volatility both upside and downside in 2017 and 2018 than in the recent prior years and that is only extenuated by broader macro headlines such as trade, tariffs and interest rates," Anstice explained. "Despite this context, we remain very excited by the long-term drivers for data economy enablement from the world of silicon and the complements of our products and services portfolio to the technology roadmap of the industry."

Source

In addition, Lam is forecasting that its sales to DRAM, logic (processor) and foundry domestic and foreign clients will all be "incrementally higher" in the first half of 2019. Nevertheless, the charts are telling me something else…there is a reason the valuation is much lower, 10 times its expected fiscal 2019 (ends in June 2019) EPS consensus. I don’t think it’s a buy now or in the near future. Lets go to the monthly chart to find out why:

TRENDLINE - price broke the monthly up trendline.