Lam Research Set to Report Q2 Earnings: Buy, Sell or Hold the Stock?

Lam Research Corporation LRCX is scheduled to release its second-quarter fiscal 2025 results on Jan. 29. The Zacks Consensus Estimate for earnings is pegged at 87 cents per share, calling for growth of 16% from the figure reported in the year-ago quarter. The earnings figure has been unchanged over the past 60 days.Image Source: Zacks Investment ResearchStay up-to-date with all quarterly releases: See Zacks Earnings Calendar.For the second quarter of fiscal 2025, the company expects revenues of $4.3 billion (+/- $300 million). The Zacks Consensus Estimate is pegged at $4.31 billion, indicating 14.6% growth from the figure reported in the year-ago quarter.Lam Research has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 7.5%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 7.4%.Lam Research Corporation Price and EPS Surprise Lam Research Corporation price-eps-surprise | Lam Research Corporation QuoteEarnings Whispers for LRCXOur proven model does not conclusively predict an earnings beat for Lam Research this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.LRCX carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00% at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Factors Likely to Influence LRCX’s Quarterly PerformanceLam Research has been riding the wave of a strong rebound in the semiconductor industry, driven by surging demand for memory and advanced AI applications. The rise in spending on AI and machine learning, particularly with the growing influence of Generative AI, is likely to have provided a significant boost to the company's performance in the fiscal second quarter. The increasing need for advanced AI-centric chips has become a key growth catalyst.Heightened dynamic random access memory (DRAM) spending, especially in response to demand for high-bandwidth memory, is likely to have played in Lam Research's favor. The company's momentum in 3D DRAM and advanced packaging technologies is also expected to have added to its strong performance. At the same time, ongoing technological advancements are pushing NAND spending higher, which is likely to contribute to Lam’s quarterly results.Lam Research’s focus on expanding semiconductor fabrication capabilities, along with its heavy investment in research and development, positions it well in a competitive landscape. Its innovation through Semiverse solutions, particularly in high-aspect-ratio memory hole etch for NAND, is likely to have fueled this progress. LRCX’s strategic investments in cutting-edge technologies are likely to have bolstered its performance in the foundry and logic segment, while the increasing adoption of 3D architectures is expected to have supported growth in its etch and deposition services.The company’s robust suite of tools, which enable foundry logic inflections, is likely to have secured strong customer traction. With the accelerating deployment of 5G and the Internet of Things (IoT), Lam Research’s semiconductor and memory solutions remain in high demand, reinforcing its market position in the fiscal second quarter.All these factors are likely to have driven growth in system revenues. The Zacks Consensus Estimate forecasts fiscal second-quarter system revenues at $2.58 billion, implying year-over-year growth of 12.2%, underscoring Lam Research’s continued strength in the evolving tech landscape. The consensus mark for the Customer Support segment’s second-quarter revenues is pegged at $1.73 billion, indicating a year-over-year increase of 18.4%.LRCX Stock Price Performance & ValuationLam Research shares have underperformed the Zacks Electronics – Semiconductors industry and the broader tech sector over the past year. The stock has also underperformed its industry peers, including Marvell Technology MRVL, Broadcom AVGO and Impinj PI.One-Year Price Return PerformanceImage Source: Zacks Investment ResearchLet us look at the value Lam Research offers investors at current levels. Currently, LRCX is trading at a discount, with a forward 12-month P/E of 21.61X compared with the industry’s 35.32X. The stock also trades at lower multiples compared to Marvell Technology, Broadcom and Impinj, which have a forward 12-month P/E of 47.22X, 36.57X and 50.01X, respectively.Forward 12-Month Price-To-Earnings MultipleImage Source: Zacks Investment ResearchInvestment Thesis for Lam Research StockDespite the cyclical downturn for the semiconductor industry now over, wafer fabrication equipment (WFE) spending is still under pressure. Although Lam Research expects a recovery in 2025, the timeline remains uncertain, particularly for the memory segment. NAND spending, which has been a key revenue driver for Lam Research, has struggled to rebound as customers delay investments in advanced nodes like 256-layer and 384-layer technologies.This delay directly impacts Lam’s growth prospects, as the company relies heavily on NAND orders. With more than two-thirds of NAND bits still produced on older nodes, a slow transition to advanced technologies could prolong the current revenue softness. For now, the company’s exposure to this segment creates significant uncertainty.However, rising geopolitical tensions between the United States and China, particularly with the U.S. Department of Commerce imposing export restrictions on Chinese chip companies, create uncertainty for Lam Research’s future. The broader global economic challenges and the potential fallout from ongoing geopolitical conflicts are major risks that could weigh on the company’s outlook.Conclusion: Exit LRCX Stock for NowWhile Lam Research remains a leader in the semiconductor industry with strong long-term potential, the current headwinds outweigh the opportunities. Persistent WFE market weakness, rising costs and geopolitical risks create a challenging near-term outlook. For investors, the prudent choice is to sell Lam Research stock for now and reassess once the industry shows clearer signs of recovery.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lam Research Corporation (LRCX): Free Stock Analysis Report Marvell Technology, Inc. (MRVL): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Impinj, Inc. 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