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Why Lam Research Stock Fell 10.8% in August

By Keith Noonan - Sep 3, 2020 at 7:55AM

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The company's outlook could be complicated by trade relations, but the stock is still up 72% over the last year.

What happened

Shares of Lam Research (LRCX -1.34%) slipped 10.8% in August, according to data from S&P Global Market Intelligence. The company's shares fell despite substantial momentum for both the broader market and the semiconductor industry.

^SPX Chart

^SPX data by YCharts

Prior to August's trading, Lam Research stock had climbed roughly 29% in 2020 and enjoyed substantial gains following the fourth-quarter results it posted at the end of July. There doesn't appear to have been much in the way of business-specific news behind the double-digit decline for the stock in August, and the pullback appears to have been a reaction to strong gains for the stock in preceding months and indications of rising tensions between the U.S. and China.  

A microchip processor.

Image source: Getty Images.

So what

Economic and diplomatic tensions between the U.S. and China flared back up in August, with disputes centering around technologies including 5G and the TikTok social network owned by Chinese company ByteDance. Increasingly adversarial relations between the two economic powers threaten to hurt performance for some companies in the semiconductor space, and it looks like Lam stock felt the pressure last month. On the other hand, the company did deliver some positive news for shareholders. 

Lam announced in a press release published on Aug. 4 that it had reached a joint development agreement with VELO3D to collaborate on the production of materials and designs for 3D-printing applications in the semiconductor industry. Lam intends to significantly increase the volume of parts that it produces using 3D-printing technology over the next five years, and the semiconductor manufacturing company anticipates related innovations will allow its customers to build chips that offer superior speed and power and smaller form factors, and consume less power. 

The company also published a press release on Aug. 27 announcing that it had approved a 13% increase for its dividend, bringing its quarterly dividend to $1.30 per share. 

Now what

Lam Research stock has seen significant recovery early in September's trading. The company's share price has climbed nearly 8% in the month so far. 

LRCX Chart

LRCX data by YCharts

Lam Research is guiding for revenue of roughly $3.1 billion in the first quarter, up about $200 million compared to the prior-year quarter. Earnings per share for the period are projected to come in at $5.06, suggesting year-over-year growth of roughly 8.6%.

Lam Research trades at around 16 times this year's expected earnings and has a dividend yield of 1.4%.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lam Research. The Motley Fool has a disclosure policy.

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