Lam Research Corp. (NASDAQ:LRCX) just posted its fifth straight record quarter, with sales up 54% and profit margins at all-time highs. Investors responded by wiping about $24 billion off its value before Thursday's opening bell.
The chip-equipment maker's shares slid 7.3% to $241.75 in premarket trading. A close at that level would be the lowest since early April and about 44% below the record set on June 30. Measured from that peak, roughly $240 billion in market value has disappeared in less than four months.
Cantor Fitzgerald thinks the market is staring at the wrong number.
In a note published Thursday, Cantor analyst C.J. Muse kept an Overweight rating and a $500 price target, about 92% above Wednesday's close. That is the highest target among the recent analyst actions tracked by MarketDash.
Lam also stays on Cantor's "Top Pick" list.
"Lam delivered a solid beat for the September Q results and December Q guide a touch above consensus," Muse said.
"We would note the guide came in below more bullish expectations coming into the print – thus the modest sell-off," he added.
The Quarter Was Not The Problem
Revenue for the September quarter reached $8.22 billion, ahead of the $8.13 billion consensus cited by Cantor. Adjusted earnings came in at $2.20 per share, against $2.18 expected.
Gross margin, the share of each sales dollar left after production costs, hit a record 52.4%. Operating margin, which also subtracts research and overhead, topped 40% for the first time.
Lam also generated a record $3.24 billion in free cash flow, the cash left after investment, and raised its quarterly dividend 27% to 33 cents.
The disappointment came from the outlook.
Lam guided December-quarter revenue to $8.6 billion, plus or minus $400 million, slightly above the $8.55 billion consensus.
According to Cantor, some investors had discussed numbers as high as $8.9 billion, "a figure we viewed as impossible."
A $300 Million Gap Stuck In The Supply Chain
The distance between the guide and those hopes is about $300 million.
That is close to the range one analyst estimated from component shortages on Wednesday's earnings call: $300 million to $400 million.
Chief Financial Officer Doug Bettinger declined to confirm the figure, but said the delayed December shipments would move into March.
Chief Executive Tim Archer said some suppliers are seeing demand grow faster than Lam's own business. "I think we'll be caught up very shortly," he said.
For Muse, that is the heart of the story. Supply, not demand, is what limits Lam's sales right now.
A second, smaller weight is on the quarter. China made up 35% of September revenue, and management expects that share to fall meaningfully in December as domestic Chinese customers spend less.
The Biggest Number on the Call: $200B
That is Lam's preliminary forecast for 2027 spending on wafer fab equipment, the machines chipmakers buy to build circuits on silicon. That's up from about $155 billion this year, roughly 30% growth, as 10 new major chip plants come online through 2027.
Management called it a constrained starting point. Cantor models $215 billion and said its checks in lithography suggest as much as $225 billion.
Lam is also taking share. Cantor expects its tool business to grow about 50% in 2026, against roughly 40% for the industry as a whole.
The firm raised its 2027 earnings estimate to $10.75 per share from $10.25. At the premarket price, the stock trades at about 22.5 times that figure, a multiple that measures how many dollars investors pay for each dollar of expected profit.
Not Every Bull is Patient
Needham kept its Buy rating Thursday but cut its target to $290 from $390, the lowest among recent calls.
Mizuho trimmed its target to $360 from $365, after Evercore ISI cut to $315 from $355 on Monday.
According to MarketDash Analyst Ratings, 20 of the 21 analysts covering the stock rate it a Buy and one rates it a Hold. Their average price target of $350 implies about 45% upside from the premarket price.
The selling is spread across the sector.
Applied Materials Inc. (NASDAQ:AMAT) fell 4.8% before the bell, KLA Corp. (NASDAQ:KLAC) dropped 4.1% and the iShares Semiconductor ETF (NASDAQ:SOXX) lost 3.5%, a day after SpaceX results had sparked a chip rebound.
