Lam Research Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

It's been a pretty great week for Lam Research Corporation (NASDAQ:LRCX) shareholders, with its shares surging 16% to US$270 in the week since its latest quarterly results. Lam Research reported US$2.2b in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of US$3.09 beat expectations, being 7.3% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see whether the latest forecasts would suggest a change of heart on the company. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.

See our latest analysis for Lam Research

Following the latest results, Lam Research's 21 analysts are now forecasting revenues of US$9.8b in 2020. This would be a reasonable 3.8% improvement in sales compared to the last 12 months. Earnings per share are expected to rise 3.7% to US$14.71. Yet prior to the latest earnings, analysts had been forecasting revenues of US$9.2b and earnings per share (EPS) of US$12.83 in 2020. So it seems there's been a definite increase in optimism about Lam Research's future following the latest results, with a nice increase in the earnings per share forecasts in particular.

It will come as no surprise to learn that analysts have increased their price target for Lam Research 12% to US$264 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Lam Research analyst has a price target of US$300 per share, while the most pessimistic values it at US$220. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Lam Research shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether analysts are more or less bullish relative to other companies in the market. We would highlight that Lam Research's revenue growth is expected to slow, with forecast 3.8% increase next year well below the historical 18%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 7.7% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts also expect the wider market to grow faster than Lam Research.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Lam Research following these results. Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Lam Research analysts - going out to 2022, and you can see them free on our platform here.

We also provide an overview of the Lam Research Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.