LRCX Swing Trade Setup Amid Volatility and Tightened Margins
"Small shifts now have bigger consequences because expectations are already elevated. This is where weak investors get confused. They see margins above 40% and relax. They stop watching direction. But direction is the whole game. Stocks repric on change, not level. So no, this decreased margin guidance does not break the thesis, but it tightens it. From here, execution has to stay clean. Cost control has to hold. Mix cannot deteriorate fast because when margins stop expanding, the market stops being forgiving. Margins are still strong. The cushion is thinner. Lamb Research only works if you respect volatility and size it like a risk asset. For me, that means I size it small. And Lamb Research is a swing trade when I like the setup."
The speaker outlines that despite strong earnings and solid margins, Lamb Research will require disciplined risk management due to increased sensitivity and volatility in its earnings. The commentary highlights that as margins tighten, the stock demands careful execution and position sizing, leading the speaker to classify it as a swing trade opportunity rather than a safe, buy-and-hold play.
Caution Against Additional Buying After 40% Run Up
"We're no longer buying Lam.. We thought it was cheap in 2023, obviously with all the other fab equipment providers. we thought it was still cheap in 2024 and through most of 2025, but then, 40% ish run up in the last couple of months. We're now saying be patient with LAM Research. We're not selling, we still have our position in Lam. It's part of our Fab five basket and the larger basket we have in the wafer fab equipment companies. But maybe just after the runup, as of late exercise, a bit of patience. But the upshot here is, and we'll, we'll monitor this, but it does seem that maybe, some of these forward valuations are implying not as good earnings growth in calendar year 2026 as Lam might actually be gearing up for."
The speaker advises investors to exercise patience with Lam Research after a significant 40% run up, suggesting that while their current position is maintained, the elevated valuation implies caution on further buying until clearer earnings growth materializes in 2026.
Lamb Research Overvalued - Avoid Adding at Current Prices
"Now, I do believe Lamb Research had really strong earnings. I actually like them a lot and I believe there's a lot of growth opportunities. But why did the market not like it or why is the market not reacting as strongly? In my opinion, it's this. This is definitely a stock that is trading much higher than it normally does. So, the median forward PE ratio in about the past 5 years is roughly 20.35. Now, right now, the stock is trading at roughly 31.52. If I was honest, Lamb Research has definitely growth opportunities, but I think the risk-to-reward ratio is not in my favor. So, if I wanted to add to Lamb Research, this is not the time I would do so."
The speaker highlights Lamb Research's strong earnings and growth potential yet cautions investors against buying at current levels due to an overvalued trading price compared to historical PE ratios, indicating an unfavorable risk-to-reward scenario.