LAM RESEARCH CORPORATION (LRCX): what the price requires
At today's price, LAM RESEARCH CORPORATION (LRCX) is priced for today's economics sustained for ~7.3 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Source: https://boothcheck.com/report/LRCX
Headline
| Field | Value |
|---|---|
| Ticker | LRCX |
| Company | LAM RESEARCH CORPORATION |
| Current price | $330.57/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 64.9% |
| Operating margin today | 34.1% |
| Margin expansion implied | +30.8pp |
| Must persist for | 7.3y |
| Multiple paid | 57x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 13.3% cost of capital; growth searched up to the 50% self-funding ceiling; each 1pp moves the implied horizon ~0.6 years.
Reconcile: at the x-ray's 9.3% required return this reads ~45.7%/yr; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.58σ |
| sustained it ~7.3 years at this level | 14% |
| implied end-window share | 1% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.73x | 5 | expensive |
| Earnings | 6.18x | 5 | expensive |
| Relative | 1.89x | 5 | expensive |
| Growth | 0.99x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $284.07 | 1.16x | yes | FCF base $7.7B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection |
| DCF Exit Multiple | Growth | $446.59 | 0.74x | yes | Exit EV/EBITDA: 53.1x / 55.1x / 57.1x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $174.83 | 1.89x | yes | P/E 31.19x (blended: static sector reference 18x + trailing (TTM) 62x), scenarios: 25.0x / 31.2x / 37.4x (bear / base = reference held flat / bull), EV/EBITDA 24.92x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $57.68 | 5.73x | yes | BV/sh $8.42, ROE (TTM) 63.4%, ke 9.3% |
| Two-Stage Excess Return | Asset | $211.56 | 1.56x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $333.45 | 0.99x | yes | Rev $21.7B, growth 27% (input: historical growth; tapered), Terminal P/S: 9.6x / 12.0x / 14.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $185.15 | 1.79x | yes | EPS $5.29, growth 35% (input: historical EPS growth), PEG=1.77 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $53.45 | 6.18x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $5.55B × (1−9%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $95.06 | 3.48x | yes | BV $8.42 + 5yr PV of (ROE (TTM) 63.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $31.65 | 10.44x | yes | √(22.5 × EPS $5.29 × BVPS $8.42) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $72.67 | 4.55x | yes | EBITDA $7.53B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $52.44 | 6.30x | yes | FCF $6004.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $49.20 | 6.72x | yes | SBC-adj FCF $5.63B (FCF $6.00B − SBC $0.38B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $170.69 | 1.94x | yes | EPS $5.29 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $17.82 | 18.55x | yes | BV $8.42 × (ROIC 19.4% / WACC 9.2%) |
| P/Sales Sector | Relative | $43.11 | 7.67x | yes | Revenue $21.68B × sector P/S 2.5x |
| PEG Fair Value | Relative | $198.38 | 1.67x | yes | EPS $5.29 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $57.19 | 5.78x | yes | EPS $5.29 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $281.6m |
| Net debt / NOPAT (after-tax) | -0.04x (net cash) |
| Net debt / operating income (pre-tax) | -0.04x (net cash) |
| Interest coverage | 43.2x |
| Share count CAGR (buyback) | -2.7% |
| Burning cash | no |
Bullet Takeaways
- Lam supplies the etch and deposition tools that benefit most as memory chips grow more vertically complex, and the AI build pushed memory to 39% of systems revenue with DRAM at a record 27% as 2026 wafer-fab-equipment spending was raised toward $140 billion.
- The biggest risks are cyclical and geographic: the price embeds a peak equipment cycle continuing, while China revenue share has fallen to about 34% and is set to decline further on export controls and rising domestic competitors.
- Watch the WFE spending trajectory and the NAND upgrade wave: management flags roughly $40 billion of NAND upgrade spending before the end of 2027, and whether that materializes determines if the current order strength extends.
Bull Case
The clearest way to see the bull case is to look at how far the price sits above every standard valuation method and then ask what could possibly justify it. The answer is the memory cycle, and it is turning hard in Lam's favor. The company makes the etch and deposition tools that carve and build the layers inside every advanced chip, and the layer count is exploding as the industry builds memory for artificial intelligence. Lam raised its 2026 wafer-fab-equipment forecast to about $140 billion, up from roughly $110 billion in 2025. Lam sells into the part of that spend that grows fastest when chips get more vertically complex, which is precisely what NAND and DRAM are doing right now.
The memory mix shift is the engine. Memory rose to 39% of systems revenue, with DRAM reaching a record 27%, as the transition to denser nodes pulls in more of exactly the deposition and etch steps Lam supplies. The 10-K describes the company's position in its own words, citing the "ALTUS systems combine CVD and ALD technologies to deposit the highly conformal or selective films" needed for advanced metallization in both logic and memory. The harder it gets to stack more layers without breaking the structure, the more indispensable Lam's process tools become. Management has also flagged roughly $40 billion of NAND upgrade spending arriving before the end of 2027 as AI inference creates new demand, an upgrade wave that lands squarely in Lam's installed base.
The quality of the business is what the premium is paying for, and it is genuine. Return on equity runs above 60%, operating margin sits in the mid-30s, and the company throws off about $6 billion of free cash flow. The balance sheet carries a small net-cash position with interest coverage near 45 times, and the share count has fallen about 3% a year, so the cash machine is funding buybacks rather than servicing debt. On top of new-tool sales, the 10-K highlights a recurring service layer, "customer service, spares, upgrades, and new and refurbished non-leading edge products", that grows with every tool ever shipped. That installed-base annuity is the part of the story the cyclical bears tend to underweight.
Bear Case
The competitive and structural pressure on Lam is concentrated in one geography and one customer concept, and both are moving against the current setup. China has been a major source of demand for semiconductor equipment, and Lam's China revenue share has already slipped to about 34% and is expected to decline further. That decline reflects two forces at once: export controls that limit what Lam can ship to Chinese fabs, and the parallel rise of domestic Chinese tool makers building competing etch and deposition equipment with state backing. Every dollar of Chinese demand that shifts to a local supplier is a dollar Lam does not get, and the trend is structural rather than cyclical.
The deeper issue is that the price embeds the current memory boom continuing for years, and memory is the most violently cyclical end market in technology. Wafer-fab-equipment spending of $140 billion is a peak-cycle number, lifted by an AI capital-spending wave that has historically overbuilt and then corrected. When memory makers over-invest, they cut equipment orders sharply, and Lam's revenue and margins compress with them. The methods that capitalize the company's normalized, through-cycle earnings power, rather than the current peak, land far below the price, which is the bear's arithmetic point: a buyer at today's level is paying a peak multiple on peak earnings, the combination that has historically punished semiconductor-equipment holders hardest when the cycle rolls over.
Lam also competes against larger and equally entrenched rivals across the equipment stack, and it does not control the architecture transitions that drive its sales. The 10-K is candid that its newest technical advances flow into both leading-edge tools and the refurbished market, which means its own innovation eventually commoditizes. If the next node transition favors a competitor's deposition or etch approach, or if the AI-driven memory build digests faster than expected, the order book can thin quickly. The balance sheet is pristine and solvency is not a concern, but a clean balance sheet does not protect the multiple. The bear case is not that Lam is a bad business. It is that an excellent, deeply cyclical business is priced as though the cycle no longer applies.
Valuation
The starting point is that no standard valuation family reaches the price. Against trailing results Lam is rich on assets, capitalized earnings, peer multiples, and even forward growth, which means the price is a bet beyond what any conventional frame supports on the current numbers. The trailing multiple is high because earnings are at a cyclical high and the market is extrapolating the AI-driven equipment boom forward. Capitalizing the company's normalized five-year-average operating income, which smooths the cycle, produces a figure far below the price, while the methods that credit continued peak-level growth come closest. That spread is the whole story: the price is underwriting durability of the current cycle, not the average one.
The pattern across methods tells the buyer what kind of bet this is. The forward-growth methods, which credit the WFE expansion and the memory mix shift, get nearest to the price, while the earnings-power and asset methods sit well below it. When only the growth lens reaches the price, the premium is a durability bet on the upcycle persisting, not a static-value argument. The decisive variable is how long wafer-fab-equipment spending holds near $140 billion and whether the NAND upgrade wave and DRAM node transition extend the boom another year or two, because those are the assumptions the price requires and the trailing financials cannot guarantee.
Solvency is unambiguously strong and removes the downside tail without supporting the multiple. Lam holds a small net-cash position, interest coverage runs near 45 times, free cash flow is about $6 billion, and the share count is falling roughly 3% a year. The company can buy back stock and invest through a downturn without strain. What the balance sheet does not do is justify a peak multiple on peak earnings; it ensures the business survives any correction comfortably, but the price still rests on the cycle staying elevated. For this name the question is not financial health, which is excellent, but cycle position, which is high.
Catalysts
The third-quarter fiscal 2026 report, delivered April 22, was a record. Revenue reached $5.84 billion, and the company raised its 2026 wafer-fab-equipment forecast to about $140 billion, citing AI-driven demand, up from roughly $110 billion in 2025. The memory mix was the headline: memory climbed to 39% of systems revenue with DRAM at a record 27%, and management pointed to dielectric-deposition opportunity growing as the industry moves to denser DRAM nodes. China revenue share fell to 34% with further declines expected, while Korea and Taiwan reached record levels.
The forward catalysts cluster around the memory upgrade cycle. Lam has flagged approximately $40 billion of NAND conversion and upgrade spending occurring before the end of 2027, accelerated by new AI-inference use cases. Analyst sentiment has firmed alongside the raised outlook, with Mizuho lifting its price target to $380 from $330 on an Outperform rating tied to NAND, DRAM, and high-bandwidth-memory trends. The catalysts to watch are the quarterly systems-revenue mix, which signals whether memory strength is holding, and the WFE forecast itself, since any downward revision would directly challenge the peak-cycle assumption embedded in the price.
Peer Cohorts (Per Segment, With Filing Citations)
Wafer processing semiconductor manufacturing equipment (single reportable segment) (reported)
- ASML (ASML HOLDING NV)
- (no filing in the citation store)
- AMAT (APPLIED MATERIALS INC /DE)
- (no filing in the citation store)
- KLAC (KLA CORPORATION)
- (no filing in the citation store)
- TER (TERADYNE, INC.)
- (no filing in the citation store)
- ACLS (AXCELIS TECHNOLOGIES INC)
- (no filing in the citation store)
- ACMR (ACM Research, Inc.)
- (no filing in the citation store)
- VECO (VEECO INSTRUMENTS INC.)
- (no filing in the citation store)
- ONTO (ONTO INNOVATION INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Lam Q3 FY2026 earnings call, April 2026 · Mizuho note, 2026