<News Alert> 1Q23 results beat, inline guidance for 2Q24
- 1Q24 results beat management’s guidance and consensus.
- Management guides for further q-o-q improvement in earnings and revenue in 2Q24
- Expect the long-term AI trend and consumer electronics recovery to boost the memory business growth, despite a more cautious outlook on logic Maintain BUY with TP of $778.7.
1Q24 results beat management’s guidance and consensus. 1Q24 revenue was $3.48bn (+9% q-o-q, -31% y-o-y). Gross margin came in at 47.5%, a further improvement from 45.5% in 4Q23 and 41.5% in 3Q23. Non-GAAP EPS of $6.85 increased 14.5% q-o-q (-34% y-o-y). 4Q23 earnings saw a strong beat of c.13% from the guidance from management while revenue exceeds by c.2%. Compared to consensus estimates, 1Q24 EPS and revenue exceeded by c.11% and 2% respectively. China accounts for the largest proportion of 48% of total revenue, followed by 16% from Korea and 9% from Japan. For 2Q24, the group forecasts revenue of c.$3.7bn (+6% q-o-q) and US Non-GAAP EPS of c.$7.0 (+2% q-o-q), based on the mid-point of the forecasts, in line with the market consensus.
AI and consumption recovery to fuel growth despite the cautious outlook on logic. Foundry and logic businesses currently face a decline in demand as global foundries exhibit caution in capital spending due to economic uncertainties. However, the memory equipment business, where Lam Research has a 38% revenue exposure in 1Q24, is set to benefit from rising demand from AI servers and a revival in consumer electronics. Additionally, Lam Research is expanding its product range to leverage the long-term AI trend. Emerging growth catalysts, such as generative AI, are in their nascent stages of adoption and are poised to significantly influence investments in both memory and foundry logic fabs in the coming years. Maintain BUY with a TP of $778.7.