Semiconductor Shares Experiencing Rapid Increase, Remarkably Affordable at Current Prices
Lam Research, the semiconductor manufacturing equipment supplier with a ticker symbol LRCX, has been on a roll in 2025. The share price has skyrocketed by an impressive 22% since the beginning of the year, making it a standout performer in the stock market. This stellar performance can be attributed, in part, to the company's strong quarterly earnings report released on January 29, 2025.
Lam's second-quarter numbers surpassed expectations, and its optimistic outlook was enough to send investors rushing to buy shares. The company's revenue for the quarter ended December 29, 2024, saw a 16% year-over-year increase, reaching $4.4 billion. Even more impressively, the bottom line grew at a faster pace, expanding by 28%.
The demand for Lam's foundry/logic and dynamic random-access memory (DRAM) manufacturing equipment remained robust throughout 2024. It's worth noting that Lam's "gate-all-around and advanced packaging technologies" are crucial for AI device manufacturing, including GPUs and high-bandwidth memory. As a result, Lam generated $1 billion in revenue from equipment sold for manufacturing gate-all-around (GAA) nodes and advanced packaging. The company anticipates this figure will triple in 2025.
Moreover, capital investments by memory manufacturers in 2025 are expected to boost Lam, which earns half its revenue from memory manufacturing equipment. Notable companies like Micron Technology and Samsung are planning to boost their capex this year, and SK Hynix is also forecasting increased investments in memory production equipment.
The broader semiconductor equipment spending environment is poised for improvement in 2025 and 2026. SEMI, an industry association, predicts a 6.8% increase in equipment spending this year, followed by a stronger jump of 14% in 2026. This trend is driven by foundries such as TSMC and U.S. tech giants increasing their capital spending to support AI infrastructure development.
Lam's guidance for the current quarter signals revenue of $4.65 billion – a 20% year-over-year increase – and a 28% jump on the bottom line. This robust earnings growth potential, coupled with the stock's attractive valuation, points towards potential upside for Lam Research in the near future.
Analysts predict that Lam's bottom line will grow at a healthy pace over the next couple of years, reaching $3.73 per share this fiscal year (ending in June 2025). Following a small dip in 2026, earnings are expected to rebound with a stronger jump in 2027. If Lam manages to achieve $4.80 per share in earnings after a few years, with a valuation of 28 times earnings (in line with the Nasdaq-100 index's current forward earnings multiple), its stock price could surge to $134 – a 52% increase from current levels.
With a market capitalization of $116.54 billion and a "Buy" rating from most analysts, Lam Research's stock price could continue to climb as investors anticipate strong financial performance in the coming years.
- Lam Research's finance department has benefited significantly from the 22% increase in the company's share price in 2025.
- Investors are showing interest in Lam, as its investing in semiconductor manufacturing equipment, particularly for gate-all-around (GAA) nodes and advanced packaging, is expected to triple in 2025.
- Analysts believe that Lam's stock, with a 'Buy' rating, could surge to $134 in the near future, given its healthy earnings growth potential and attractive valuation.
- The increasing investment in capex by notable companies like Micron Technology, Samsung, and SK Hynix in 2025 is expected to be one of the enablers for Lam's financial growth.
