Lam Research Corp LRCX

Wide-moat Lam Research reported fiscal second-quarter results that came in below our expectations and the midpoint of management's guidance due to delays in system components and broad supply chain hurdles, similar to equipment peer ASML. Due to the component delays, December quarter sales fell short by more than $200 million. Nonetheless, management remains confident that equipment demand is still robust and anticipates calendar 2022 wafer fab equipment, or WFE, spending of around $100 billion, which is consistent with our estimates. Supporting this growth in WFE are large 2022 capital expenditure budgets from TSMC ($44 billion) and Intel ($25 billion to $28 billion). Although Lam has historically had greater exposure to memory end markets, we think it has improved its foundry and logic design wins in recent years sufficiently to achieve healthy growth in 2022 once it is able to overcome its aforementioned supply chain headwinds. Our $720 fair value estimate remains intact, and we think prospective investors should find current levels attractive, particularly amid the recent sell-off in technology stocks.