A Look at Lam Research’s Valuation as Strong Results and New Oregon Facility Drive Growth

Lam Research (LRCX) just reported quarterly results that topped expectations and celebrated the opening of a $65 million research and development facility in Oregon, indicating its steady focus on long-term demand.

See our latest analysis for Lam Research.

Lam Research’s latest expansion in Oregon arrives as the company continues to impress investors, not just with positive earnings surprises, but also with strong business momentum. After increasing 9.4% in the past week and delivering a year-to-date share price return of 115%, Lam’s total shareholder return over three years stands at 252%. The persistent rally suggests growing confidence in its role at the center of the semiconductor and AI supply chains, reinforcing longer-term growth prospects.

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With Lam Research’s latest outperformance and expansion, a key question emerges: Is the recent surge a sign the stock remains undervalued in a booming sector, or has the market already priced in years of anticipated growth?

Most Popular Narrative: Fairly Valued

The widely followed narrative places Lam Research’s fair value almost in line with its last closing price. This sets up a debate over whether current market optimism is already fully reflected in the stock or if more upside remains. Here is a key catalyst driving this perspective:

Expanding government incentives and a global push for semiconductor self-sufficiency, for example, US and EU CHIPS Acts, are spurring new fab construction and regional equipment investments. This directly contributes to higher system sales and broadens Lam's customer base, reducing revenue cyclicality and regional risk.

Read the complete narrative.

Curious what assumptions power this razor-thin valuation margin? The "fair" price rests on pivotal growth forecasts and margin calls you might not see coming. There is a bold claim embedded in analyst models—want to discover the specifics before the rest of the market realizes?

Result: Fair Value of $158.52 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain. Geopolitical uncertainty and customer concentration could pressure Lam’s revenue and margins if market conditions shift unexpectedly.

Find out about the key risks to this Lam Research narrative.

Another View: Our DCF Model Puts the Spotlight on Value

While analyst consensus suggests Lam Research is fairly priced, our SWS DCF model presents a very different perspective. In this view, the stock appears to be trading well above its estimated intrinsic value, raising concerns that market enthusiasm may not align with the underlying fundamentals. The question remains whether future cash flows can justify today’s price.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Lam Research for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 917 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Lam Research Narrative

Feel like the current outlook misses your angle, or prefer charting your own path? You can analyze the numbers and build your own take in just minutes. Do it your way

A great starting point for your Lam Research research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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