Short-term trend line helping guide Lam Research higher
Since the low at the beginning of June, semiconductor manufacturer Lam Research (Nasdaq: LRCX) has been trending higher and a trend line connects the stock's lows over the last two months. The stock hit the trend line earlier this week and has bounced since then.
We see that the trend line connects the lows from June 17, June 25, and July 8. The series of higher lows has helped the stock move up 16% since the beginning of June and that is considerably better than the 6.76% gain by the S&P 500.
We see that the daily stochastic readings reached an oversold level earlier this week and have since made a bullish crossover. We saw a similar move by the indicators back in March before the stock went on a rally that saw the stock gain 25% in less than two months.
Another potential bullish factor for the stock is the fact that the 50-day moving average is in the same vicinity of the trend line and that could provide a secondary layer of support for the stock.
From a fundamental perspective, Lam Research has performed extremely well in the last few years, but struggled in the most recent quarterly report. The company had managed to grow earnings at a rate of 45% per year over the last three years, but second quarter earnings declined by 32% on a year over year basis.
The revenue numbers tell a similar story with the annual growth rate for the last three years coming in at 25%, but in the second quarter revenues were down 24% from the second quarter of 2018.
Lam Research has some really strong management efficiency ratings with a return on equity of 41.6% and a profit margin of 30.4%.
The Tickeron SMR rating for this company is 37, indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of 20 indicates that the company is slightly undervalued in the industry. A rating of 1 point to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.
Turning our attention to the sentiment indicators for Lam Research we see that there are 22 analysts following the stock. Of those 22 analysts, only 12 rate the stock as a “buy” while the other 10 rate the stock as a “hold”. This gives an overall buy percentage of 54.5% and that is well below average.
The short interest ratio is currently at 4.99 and that is slightly higher than the average stock and is indicative of slightly bearish sentiment. There are 8.2 million shares sold short at this time and that is up from 6.2 million in mid-May. At the same time that the number of shares sold short was on the rise, the average daily trading volume was falling from 1.75 million to 1.65 million.
With Lam Research having pretty solid fundamental ratings and seeing the upward trend in the stock, it is somewhat surprising to see the bearish sentiment toward the stock. From a contrarian perspective this could be good for the stock as it can help push the stock higher in the coming weeks.
LRCX in upward trend: price rose above 50-day moving average on January 30, 2025
LRCX moved above its 50-day moving average on January 30, 2025 date and that indicates a change from a downward trend to an upward trend. In of 44 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 49 cases where LRCX's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for LRCX just turned positive on January 31, 2025. Looking at past instances where LRCX's MACD turned positive, the stock continued to rise in of 54 cases over the following month. The odds of a continued upward trend are .
The 10-day moving average for LRCX crossed bullishly above the 50-day moving average on January 13, 2025. This indicates that the trend has shifted higher and could be considered a buy signal. In of 14 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where LRCX advanced for three days, in of 302 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 293 cases where LRCX Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The 10-day RSI Indicator for LRCX moved out of overbought territory on January 23, 2025. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 46 similar instances where the indicator moved out of overbought territory. In of the 46 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Momentum Indicator moved below the 0 level on February 03, 2025. You may want to consider selling the stock, shorting the stock, or exploring put options on LRCX as a result. In of 87 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where LRCX declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
LRCX broke above its upper Bollinger Band on January 22, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 71, placing this stock better than average.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. LRCX’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (15.649) is normal, around the industry mean (11.057). P/E Ratio (37.872) is within average values for comparable stocks, (60.106). Projected Growth (PEG Ratio) (2.793) is also within normal values, averaging (2.678). Dividend Yield (0.008) settles around the average of (0.021) among similar stocks. P/S Ratio (9.174) is also within normal values, averaging (48.793).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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a manufacturer of semiconductor processing equipment
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