Lam Research is a ‘buyer beware’ stock: Piper Sandler

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Lam Research Corporation (NASDAQ: LRCX) has been cut in half this year as higher rates keep investors clean of the tech stocks. Still, a senior Piper Sandler analyst warns it may not have bottomed yet.

Lam Research to report its Q3 results next week

Craig Johnson expects the wafer fabrication equipment supplier to report disappointing results for its recent quarter. Lam Research is set to report next week.

He talks of a possibility of another 30% downside in Lam Research from here. On CNBC’s “Power Lunch”, Johnson said:

A break below the $295 level will leave support at $225. So, this is a stock I have to pan at this point in time and wait to try to find some identifiable support because on doesn’t win trying to catch the falling knife.

Consensus is for the Nasdaq-listed firm to earn $9.54 a share this quarter versus $8.36 a year ago.

U.S. tightened restrictions on chip export to China

Semiconductor stocks at large are challenged heading into the earnings season on fears of lower demand and high inventories.

On top of that, the U.S., earlier in October, tightened its restrictions on export of more sophisticated chips to China. Effects of that, Johnson argued, will reflect further in shares of Lam Research moving forward. He added:

I think this is a buyer beware stock. If you look at the longer-term, weekly chart, it’s a distributional top that’s been made here in Lam Research. So, it’s a poor risk-reward at this point in time.

The U.S. Fed has made it clear that it intends to lift rates further, especially after the consumer prices were recently reported up 0.4% for September. That remains another significant headwind for the Fremont-headquartered firm.

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