First semiconductor stock to buy after Micron Technology releases stellar report

Micron Technology (NASDAQ:MU) Last week, the company wowed investors with a strong set of results for the second quarter of fiscal 2024, with huge revenue growth and unexpected profits, sending the memory specialist’s shares soaring.

The chipmaker benefits from Demand for memory chips surgesr. As a result, its revenue increased 58% year over year to $5.8 billion.Micron expects revenue in this quarter to rise 76% year-on-year, mainly due to increased demand for memory chips AI (AI) servers, smartphones, and personal computers (PC).

The memory industry has seen a major shift recently as demand for consumer electronics is back on track, while artificial intelligence creates demand for advanced memory chips known as high-bandwidth memory (HBM). Micron management said on its latest earnings call that its 2024 HBM capacity has been sold out, and “the vast majority of our 2025 supply has been allocated.”

This pair Pan-forest research (NASDAQ: LRCX), a semiconductor equipment maker that derives a large portion of its revenue from selling products to memory makers such as Micron. Let’s take a look at why Micron’s latest results suggest investors would be better off buying Lam Research stock now.

Forest research is about to witness a robust transformation

In the most recent quarter, 48% of Lam Group’s revenue came from selling semiconductor manufacturing equipment to memory manufacturers, which also explains the company’s poor performance in recent quarters. Capacity expansion has been put on hold, so Lin’s revenue and profits have been declining.

LRCX Revenue (TTM) Chart

LRCX Revenue (TTM) Chart

Analysts expect the company’s revenue to fall 22% this fiscal year to $13.6 billion. Additionally, earnings per share are expected to fall from $34.16 to $26.76. However, as the chart below shows, Lam Research’s revenue and earnings are likely to grow significantly in the next fiscal year, which begins at the end of June 2024.

LRCX next fiscal year revenue forecast chartLRCX next fiscal year revenue forecast chart

LRCX next fiscal year revenue forecast chart

Micron’s latest results and management commentary tell us why Lam’s fortunes are about to improve. Memory manufacturers will need to increase HBM supply to meet the growing demand for AI servers. On the bright side, Lam has already received solid orders for HBM equipment. CEO Tim Archer noted on the company’s January conference call with analysts: “In 2024, we expect our HBM-related DRAM and packaging shipments to more than triple year over year…”

It is also worth noting that the overall memory market is expected to grow significantly through 2024. Gartner CorporationIt is expected that the revenue of the memory industry may grow by 66% this year after falling by 39% in 2023. What’s more, the growing popularity of artificial intelligence will drive strong long-term memory demand.

According to Micron, AI-enabled PCs may carry 40% to 80% more DRAM (dynamic random access memory) content compared to traditional PCs. On the other hand, the company expects AI-enabled smartphones to “carry 50% more DRAM than today’s non-AI flagship phones.”

Meanwhile, demand for HBM is expected to more than double in 2024, generating $14 billion in revenue, compared with $5.5 billion last year. Even better, the HBM market could generate nearly $20 billion in revenue next year. This all points to the need for memory manufacturers to ramp up production, and a closer look at the industry shows that’s exactly what’s happening.

Taking Samsung as an example, HBM production is expected to increase 2.5 times in 2024 and 2 times next year; similarly, SK Hynix is ​​expected to increase capital expenditures this year to support growing HBM demand. Conditions will become favorable for pan-silver research.

Buying stocks now is a no-brainer

Lam Research currently trades at a price-to-earnings ratio of 27 times, which represents a small discount to the expected price-to-earnings ratio. NASDAQ-100The average multiple is 28 (using the index as a proxy for technology stocks). If Lam Research’s profits meet forecasts of $46, and it trades at 28 times earnings, the stock would hit $1,288, a 33% upside from its current price.

However, don’t be surprised to see the stock rise strongly, as the market will likely reward it with a higher P/E ratio due to artificial intelligence-driven growth, which is why investors should consider buying this semiconductor stock before it jumps higher.

Should you invest $1,000 in Lam Research right now?

Before buying Lam Research stock, consider the following factors:

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harsh johan The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns and recommends Lam Research. The Motley Fool recommends Gartner. Motley Fool has disclosure policy.

First semiconductor stock to buy after Micron Technology releases stellar report Originally published by The Motley Fool

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