Shares of Lam Research (LRCX) opened higher Wednesday, tagging fresh 52-week and all-time highs of $198.88, although shares are currently slightly lower on the day. The company beat on top and bottom line earnings results for its fiscal fourth quarter, causing the early rally.
Indeed, the results were impressive. Sales grew by more than 50% year-over-year, while fiscal first-quarter guidance came in ahead of analysts' estimates for both earnings and revenue.
It was a great quarter, a "fabulous conference call" and CEO Martin Anstice continues to do a great job, TheStreet's Jim Cramer said on CNBC's "Mad Dash" segment. It's understandable for Cramer to view the company's results with optimism, given his longstanding bullishness on the semiconductor equipment industry.
The strong demand for DRAM and NAND products have driven prices higher, which is good for producers like Micron (MU) and Samsung (SSNLF) . It's also good for those that make the equipment for the producers, like Lam Research and Applied Materials (AMAT) . It's not so good for DRAM and NAND buyers, like Apple (AAPL) , Cisco Systems (CSCO) and HP Inc. (HPQ) .
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But beware, warned Cramer, who also manages the Action Alerts PLUS charitable trust portfolio. The rhetoric will start to grow louder that Micron, Samsung and others will overproduce DRAM and NAND. This will cause DRAM and NAND pricing to fall and could end the big cycle all of these companies have been flourishing in. Shares of Lam Research are up nearly 100% over the past 12 months and it too will come under pressure should DRAM and NAND prices fall.
For now, though, that production and pricing power remains strong. Anstice should talk a good game, because things are going well for Lam Research. That goes for next quarter as well. Cramer acknowledged that he does have concerns for the second half of 2018, though.
The overbuilding has happened before, he reasoned, questioning whether Micron or Samsung would lose their discipline over the coming quarters. "I think flash [prices] could peak," and that's not good for Lam Research, he said.
Cramer worries about production discipline but also the fact that Apple has teamed up with Bain Capital in the purchase of Toshiba's flash business. Apple wants lower prices, because it's one of the largest, if not the largest, buyers of flash storage, he concluded.
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