Lam Research upgraded, KLA, Micron Technology downgraded at Deutsche Bank

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By Sam Boughedda 

Deutsche Bank analysts upgraded shares of Lam Research (NASDAQ:LRCX) but downgraded KLA Corporation (NASDAQ:KLAC) and Micron Technology (NASDAQ:MU) in separate notes on Monday.

The analysts upgraded Lam research to Buy from Hold, cutting the firm's price target on the stock to $400 from $520 per share. They told investors that "LRCX has the most memory exposure among large-cap semi cap companies hence its stock has suffered the most in 2022, with many memory suppliers suggesting large capex cuts and new technology export restrictions impacting China's memory companies."

"While we still see some risks to memory WFE in the near term, investor expectations are already low enough and should not have a significant impact on LRCX's share price," they added.

Meanwhile, Micron Technology was downgraded to Hold from Buy with its price target cut to $55 from $60 per share, with the analysts stating the firm is "incrementally more cautious on the memory market," as they believe the current downturn will "last longer and be more severe" than they previously forecasted.

"On the demand side, weakness in consumer PC/smartphone has now spread to the enterprise side, and even cloud demand is starting to weaken. On the supply side, we give credit to MU for taking actions to limit its supply growth, but Samsung's unwillingness to cut back on capex and production will likely prolong the downturn," the analysts added.

Finally, KLA Corporation was moved to Hold from Buy, with its price target cut to $370 from $400 per share. The analysts explained that KLAC's shares have "outperformed the semi cap sector year-to-date, with the stock down only -7%, vs. down ~30% for both semi cap peers and the SOX."

"In CY22, KLAC is benefitting from its over-indexing to a resilient foundry/logic market, as well as from its customers' focus on yield improvement vs. fab capacity expansions. In addition, KLAC's WFE share improved partly due to supply challenges impacting its peers' shipments. Looking forward, we forecast growing uncertainty around foundry/logic WFE spend in CY23 and CY24, to which KLAC is overexposed. We also expect supply chain to normalize, making it less likely for KLAC to outgrow the WFE market," they wrote.