Lam Research (LRCX): A Fresh Look at Valuation After Recent Share Price Dip

Lam Research (LRCX) shares have attracted investor attention following a dip of nearly 4% over the past week. Many market watchers are eyeing the stock’s valuation and longer-term returns, especially given the strong growth in both revenue and net income this year.

See our latest analysis for Lam Research.

Lam Research has rebounded swiftly from its recent pullback, and while last week’s share price return was negative, the stock’s momentum over the past year is hard to ignore. With a 1-year total shareholder return near 98%, it is clear investors are still optimistic about long-term growth, even with some near-term volatility.

If strong returns in the semiconductor space have your attention, now might be the perfect moment to discover See the full list for free.

The strong run-up in Lam Research’s share price raises an important question for investors: Is the stock undervalued at current levels, or is the market already pricing in all expected growth ahead?

Most Popular Narrative: 10% Undervalued

Lam Research’s widely followed narrative puts its fair value around $158.52, which is about 10% above the recent close of $142.65, hinting at meaningful upside as AI demand and memory growth expectations shape analyst forecasts. The consensus rests on bullish assumptions about Lam’s technology leadership and market expansion, underpinned by sizable projected earnings gains.

Rapidly rising AI workloads and the associated need for higher storage, bandwidth, and processing power are accelerating the adoption of advanced chip architectures (such as gate-all-around, 3D NAND, and advanced packaging), which increases demand for Lam's etch and deposition tools, supporting sustained revenue growth and robust order visibility.

Read the complete narrative.

Wondering what financial leaps fuel this premium valuation? The narrative hinges on a future vision of expanding profits, ambitious margins, and a bold market multiple. Yet only the full story uncovers which assumptions push Lam’s price target so high. Dive in to see whether these bullish projections hold up.

Result: Fair Value of $158.52 (UNDERVALUED)

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

However, ongoing geopolitical tensions and potential declines in demand from major customers could quickly challenge the bullish outlook and put pressure on Lam’s margins.

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

Another View: SWS DCF Model Challenges the Multiple-Based Narrative

While the fair value estimate based on analyst assumptions points to Lam Research being undervalued, our SWS DCF model presents a contrasting scenario. According to this method, Lam is actually trading well above its intrinsic fair value. This suggests investors may be pricing in more growth than fundamentals support.

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

Which valuation approach best aligns with your expectations for Lam’s future? The answer could shape your next move.

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

If you want to dig into the numbers or take a different view, you can easily craft your own perspective on Lam's prospects in just a few 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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