Lam Research Q3

Lam Research is a name I have been following since June of 2018. I have been in and out of shares, and of course I was better off just holding them per usual.

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Lam Research posted record revenues from both their systems and installed businesses, coupled with record cash flow from operations and record earnings per share.

Earnings estimates were $6.61 vs $7.49 per share, a 13.37% surprise

Revenue estimates were $3.72b vs $3.85 actual, a 3.34% surprise

Here are the historical beats:

EPS:

Revenue:

Brief Notes on the Report:

Record revenue coming in at $3.85b, at the high end of their guidance (as usual). The driving force behind this was the increase in foundry-related systems, and their Customer Support Business Group (CSBG) which is something I have highlighted over the years as a recurring service model. With Fabs running at high utilization levels, this drove spare parts and services.

• Seeing leading-edge investments in 5-nanometer

• Spare parts supporting higher equipment utilization, continue through the year

• Gross Margins 46.3%, in-line with expectations (fluctuates Q2Q, higher freight costs and logistics costs)...

• Monitoring potential tax changes in the US

• Unprecedented demand, not divulging lead times

• Capacity is tight, but has extended lead times

• Visibility is good

• Upgrades in the CSBG are strong, high ROI for customers to get increased capabilities

• Spares were strong as well

• Service correlates with utilization in the industry

• CSBG $1.3b, up 50% from a year ago, firing on all levels

"These devices are utilizing an increasing number of sophisticated sensors manufactured using mature technology nodes to deliver added functionality such as body temperature measurement, heart rate monitoring and blood oxygen sensing." This is interesting in the call, as Apple builds out their wearables with the Apple watch and the Apple watch does the blood oxygen sensing!

I am not going to sit here and write like I understand every aspect of Lam Research's business and their products, but an investor must be able to realize when an opportunity in a strong industry exists. Lam Research has proven over the years at being a staple to the semiconductor industry, with secular trends such as 5G, IoT, and big data, there is only a stronger need for their equipment which they are benefitting heavily off of. I love the business, they are a financial power house, and continue to stay long in my active account.

I do not see how one cannot own Lam Research in a portfolio for the foreseeable future. I am long and will continue to stay long! Picks and shovels play in the industry.