Lam Research Rallies 25% YTD: Is it Too Late to Buy the Stock?

Lam Research Corporation LRCX has had a strong run so far this year, rallying 25.3%. This is well ahead of the Zacks Electronics – Semiconductors industry, which has risen just 5.1% during the same period.Lam Research stock has also moved ahead of several semiconductor peers, including Broadcom Inc. AVGO, NVIDIA Corporation NVDA and Advanced Micro Devices, Inc. AMD. YTD, shares of Broadcom, NVIDIA and Advanced Micro Devices have risen 7.8%, 7.1% and 6.2%, respectively.This outperformance shows that investors are confident about Lam Research’s future despite market challenges like trade tensions and geopolitical risks. In our view, the stock’s solid fundamentals support this optimism, and LRCX still looks like a good buy at current levels.LRCX YTD Price Return PerformanceImage Source: Zacks Investment ResearchAI and Data Center Trends Drive LRCX’s Growth StoryLam Research is in a good position to benefit from the growing demand for artificial intelligence (AI) and data center chips. These chips require advanced manufacturing steps, and LRCX supplies critical equipment for this, such as deposition and etching tools.In 2024, Lam Research shipped more than $1 billion worth of products for next-generation chip nodes and packaging. The company expects this number to triple in 2025.As the semiconductor industry shifts to new technologies like backside power distribution and dry-resist processing, Lam is well placed to gain. With AI investments picking up, Lam Research’s tools are essential to help chipmakers scale up production.Lam Research’s Investments Are Delivering ResultsLam Research’s steady investments in research & development and new products are paying off. Its Cryo 3.0 technology has set new standards in the industry, and the Aether dry-resist system is being adopted, especially for high-bandwidth DRAM.Expanding its manufacturing operations in Asia has also helped the company lower costs and improve margins. In the third quarter of fiscal 2025, Lam Research’s non-GAAP operating margin rose to 32.8%, up 210 basis points from last year. That’s impressive, considering the tough conditions in the semiconductor market.Financials Show Lam Research’s StrengthLam Research’s latest financial results for the third quarter of fiscal 2025 confirm its ability to execute well, even in uncertain times. Revenues rose 24.5% year over year to $4.72 billion, while non-GAAP EPS (adjusted for the stock split) jumped 33.5%. Strong demand from memory and logic customers, along with tight cost control, helped the company beat expectations on both the top and bottom lines.Lam Research’s consistent performance reinforces investor trust in its long-term business model and earnings stability. The stock has an impressive history of beating earnings estimates. LRCX surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 6.1%.Lam Research Corporation Price, Consensus and EPS Surprise Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation QuoteLRCX’s Valuation Still Reasonable After RallyEven after this year’s rally, Lam Research stock doesn’t look expensive. LRCX currently trades at a forward price-to-earnings (P/E) multiple of 22.7X, which is significantly lower than the industry’s 30.91X. The company’s discounted valuation multiple aligns with its long-term growth potential.Image Source: Zacks Investment ResearchIt is also cheaper than major semiconductor players, including Advanced Micro Devices, NVIDIA and Broadcom. At present, Advanced Micro Devices, NVIDIA and Broadcom have forward 12-month P/E multiples of 27.12X, 30.16X and 32.56X, respectively.Bottom Line: Lam Research Still Looks Like a BuyLam’s reasonable valuation, strong financials and clear focus on AI-related growth make it a good investment choice right now. Its market position in AI and data center chipmaking, combined with ongoing innovation, should keep driving long-term gains.LRCX carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant 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 Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Lam Research Corporation (LRCX): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks