Updated from 9:38 a.m. EDTShares of Lam Research ( LRCX) moved up Thursday, as bulls seized on the big upside surprise and sturdy guidance reported after the close Wednesday. The firms' fiscal fourth-quarter report was evidence, some argued, that there's still room for the industry to grow, contradicting speculation that the semiconductor capital equipment industry is fast approaching (or already beyond) the much-ballyhooed peak of the cycle. Lam shares were recently up $2.95, or 14.9%, to $22.75. ThinkEquity Partners' Suresh Balaraman raised hisrating on the stock to buy Thursday morning. "Confounding skeptics that equipment suppliers cannot grow from cycle to cycle, Lam should achieveits highest EPS ever of over 60 cents in fiscal first quarter -- vs. 48cents in the peak of last cycle," he wrote in a morning note. Balaraman hiked his calendar-year 2005 EPS estimate to $2.77 from $2.07. More broadly, Balaraman predicted that with gradualequipment order rates of 5% to 10% a quarter throughout the industry, the semi equipment buying cycle can extend into 2006 or 2007. ThinkEquity hasn'tdone any investment banking for Lam. At Susquehanna, analyst Kevin Vassily also raisedhis calendar-year 2004 EPS estimates for Lam to $1.69 from $1.21 and his 2005 estimates to $1.63 from $1.28. Results were "well above expectations, asaccelerated equipment shipments led tobetter-than-expected operating leverage and a pleasantearnings surprise. Guidance is also very strong,leading to a sharp increase in our estimates," hewrote. On Wednesday, Lam forecast sales of $400 million to$415 million, with EPS between 55 cents and 60 cents,compared wiht the First Call estimates for $338 millionand 34 cents. The company's strong fiscal fourth-quarter report suggests that it is still in a period of above-average growth, he wrote. "Some analysts and investors, although adiminishing group, believe that
The business contributes less than 5% of revenue and has been a drag on profits, Berg said. Lam "has achieved minimal traction since it entered this business in the latter 90s," he wrote. He said he hadn't yet adjusted EPS estimates to account for the change, since any R&D allocated to CMP might be shunted to future etch tool projects. Added Berg, "While we are not speculating on M&A activity, this event could reduce barriers for a potential acquisition by another company." He has an overweight rating on the stock. Lehman hasn't done investment banking for Lam.