Lam Research (NASDAQ: LCRX) is one of the fastest growing stocks around.
In the past year, Lam’s price went from $308.44 on 3 February 2020 to $580.02 on 19 January 2021 to $515.05 on 2 February 2021 to $504.33 on 3 February 2021. Thus, if it there is a 2020 to 2021 Tech Bubble, Lam Research (LCRX) could be its poster child.
So what is Lam Research and does it make money? Lam Research builds the wafer fabrication machines that make semiconductors. Thus, Lam Research has some attributes of a Buffett-style value investment.
To explain, Lam Research makes the machines that build the components from which they build almost every high-tech device. Remember, semiconductors run computers, smartphones, autonomous cars, video games, and almost every other tech device.
How Much are Semiconductors worth?
I think the success of semiconductor and processor manufacturers such as NVDIA (NVDA)drives investment in Lam Research.
Semiconductors are a lucrative and growing business. For instance, global semiconductor sales grew by 6.5% to $439 billion in 2020, the Semiconductor Industry Association (SIA) estimates.
Notably, semiconductor sales were $39.2 billion in one month; December 2020, the SIA estimates. Furthermore, semiconductor sales for fourth quarter 2020 were $117.5 billion. Semiconductor sales grew by 8.3% between fourth quarter 2019 and the same period in 2020.
In contrast, Statista estimates the global semiconductor market grew from $33 billion in 1987 to $469.4 billion in January 2021. Therefore, semiconductors are one of the fastest growing investments in the world.
Does Lam Research Make Money?
The Lam Research Corporation (LRCX) is making money. For instance, Lam Research reported a quarterly gross profit of $1.604 billion and a quarterly operating income of $1.01 billion on 31 December 2020.
The quarterly operating income rose from $686.51 million on 31 December 2019. In comparison, Lam’s quarterly gross profit rose from $1.180 billion 31 December 2019.
Similarly, Lam’s quarterly revenues rose from $2.584 billion on 31 December 2019 to $3.456 billion on 31 December 2020. Moreover, Stockrow estimates Lam Research’s revenues grew at a rate of 33.78% in the quarter ending on 31 December 2020.
Impressively, in 2020 Lam’s revenue growth rate rose from 2.41% in the quarter ending on 31 December 2019 to 46.7% in the quarter ending on 30 September 2020. Consequently, I think Lam Research offers an excellent margin of safety because of the high rate of growth.
How Much Cash does Lam Research Generate?
Lam Research (LRCX) generates some cash. For instance, Lam reported a quarterly operating cash flow of $344.64 million on 31 December 2020.
The quarterly operating cash flow grew from $307.93 million on 31 December 2019. However, Lam Research reported a negative quarterly ending cash flow of -$442.55 million on 31 December 2020. The quarterly ending cash flow fell from $4.382.52 billion on 30 September 2020 and grew from -$1.572.04 billion on 31 December 2019.
Therefore, Lam Research can generate enormous of cash. Additionally, Lam Research borrows some money but pays debts. For example, Lam Research reported a quarterly financing cash flow of -$865.32 million on 31 December 2020 and a quarterly financing cash flow of $225.45 million on 30 June 2020.
Finally, Lam Research had $6.042 billion in cash and short-term investments on 31 December 2020. The cash and short-term investments grew from $4.64 billion on 31 December 2019.
What Value Does Lam Research Have?
Lam Research (NASDAQ: LRCX) had some value in the form of $15.37 billion in total assets on 31 December 2020.
The total assets grew from $11.914 billion on 31 December 2019. Conversely, Lam’s long-term debt grew from $3.786 billion on 31 December 2019 to $4.993 billion on 31 December 2020.
Thus, Lam Research is gaining value and debt. However, I see nothing in Lam’s financial numbers that justified the $516.07 Mr. Market paid for it on 2 February 2020.
Is Lam Research a good stock?
I think Lam Research (LRCX) is far too expensive to be a value investment. However, Lam is an excellent dividend stock.
Lam Research paid a $1.30 quarterly dividend on 8 December 2020. Notably in 2020, that quarterly dividend grew from $1.15 on 16 June 2020. Overall, Lam shares offered an annual dividend of $4.90 and a 1.01% dividend yield on 2 February 2021.
I consider Lam Research an interesting stock Mr. Market overprices but offers an excellent income and margin of safety. Lam has some wonderful characteristics but its price too high to be safe.