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Citi maintains Buy on Lam Research, $1,025 target amid buyback

EditorBrando Bricchi
Published 05/22/2024, 12:56 AM

On Tuesday, Citi reaffirmed its Buy rating on Lam Research (NASDAQ:LRCX), maintaining a price target of $1,025.00. The decision follows Lam Research's announcement on May 21 that its Board of Directors has approved a new $10 billion share repurchase plan. This new plan adds to the $1.2 billion remaining from previous authorizations as of the end of March.

The company has a history of share buybacks, having announced similar plans three times from January 2019 to May 2022, each valued at $5 billion. The increased amount of the current plan reflects Lam Research's confidence in its business operations, its strong cash flow generation capabilities, and its commitment to returning 75%-100% of free cash flow (FCF) to shareholders through buybacks and dividends.

In the calendar year 2023, Lam Research generated a free cash flow of $4.9 billion and returned approximately 80% of this to its shareholders, with a 75%/25% split between buybacks and dividends. The company has also consistently raised its dividends annually for the past decade.

Additionally, Lam Research announced a 10-for-1 stock split, set to take effect after market close on October 2, 2024. While this split does not alter the company's fundamentals, it is expected to make stock ownership more accessible to employees worldwide and to enhance trading liquidity.

Citi's endorsement of Lam Research's stock remains strong, with the firm naming LRCX as its top equipment pick in the sector.

InvestingPro Insights

As Lam Research (NASDAQ:LRCX) garners a favorable outlook from Citi with a reaffirmed Buy rating and a significant share repurchase plan, real-time data from InvestingPro underscores the company's financial stature and market position. Lam Research boasts a robust market capitalization of $125.87 billion, reflecting its substantial presence in the industry. Despite a challenging environment indicated by a revenue decline of 24.48% over the last twelve months as of Q3 2024, the company has shown resilience with a gross profit margin of 47.19%, suggesting effective cost management and strong pricing power.

InvestingPro Tips further reveal that Lam Research has not only consistently increased its dividends for over a decade but also that analysts have revised their earnings upwards for the upcoming period, highlighting the company's potential for continued financial performance. However, it's noteworthy that the stock is trading at a high earnings multiple, which suggests a premium valuation compared to its earnings. For investors looking to delve deeper into Lam Research's metrics, InvestingPro offers additional tips and insights that can be found at https://www.investing.com/pro/LRCX. Moreover, interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to an extensive range of analytical tools and data to make informed investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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