The wavering of companies in the semiconductor sector on the stock market should concern investors who have a short-term view of the markets. Fortunately, fundamentals will give the sector a boost. Lam Research’s (NASDAQ: LRCX) second-quarter results, which trounced estimates, should renew investor interest in the sector.
Lam Research reported earnings of $4.34, beating consensus estimates by a decisive $0.66 a share. Revenue rose 37.2% Y/Y to $2.58 billion. The results confirm the strong growth in the chip sector. Even Intel (NASDAQ: INTC) topped estimates when it reported results on January 25.
Lam Research’s results should convince those holding Micron Technology (NASDAQ: MU) stock that there is deep value at these levels. Micron is valued at a five times forward P/E, compared to 13 times for LRCX stock. The difference is that Lam’s stock pays a dividend yielding around 1%, plus the company is buying back billions worth of its shares.
Applied Materials (NASDAQ: AMAT) reports in mid-February. It, too, should beat consensus estimates. The positive results should all put an end to the discount in MU stock as buyers step into the sector.
