Lam Research Corporation

(NASDAQ Global Select)
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Slightly Bearish -10

Lam Research vs. Applied Materials: Which Buybacks Are Better Covered by Cash?

AI infrastructure AI-generated analysis

πŸ“Š Lam Research generated $1.457 billion in operating cash for the quarter ended June 28, leaving $1.268 billion after capital expenditures.

πŸ’Έ Combined buybacks of $246.6 million and dividends of $325.3 million consumed 45.1% of Lam's residual cash in the latest quarter.

πŸ“‰ For the fiscal year ended June 28, Lam's total payouts of $5.122 billion exceeded its post-investment cash generation by approximately $231 million.

πŸ” Trailing free-cash-flow multiples were valued at 69x for Lam Research as of October 16.

πŸ“ˆ Hedge fund ownership in Lam rose to 139% from 123% between the reported quarters.

🏦 Arrowstreet reduced its Lam Research holdings by 7%, while Coatue cut Applied Materials shares by 20% during the same period.

βš–οΈ Analysts suggest investors should test payout coverage across different periods rather than relying on single-quarter data.

πŸ“‰ Short interest stood at 2.1% of float for Lam Research as of September 30.

Bullish Signals
  • Lam Research generated $1.457 billion in operating cash during the quarter ended June 28, demonstrating strong cash generation capabilities.
  • The company's full-year fiscal performance showed a significant excess of cash generation over payouts, allowing for sustained collections and disciplined repurchase strategies.
Risk Factors
  • Lam Research's latest quarter saw combined buybacks and dividends consume 45.1% of its residual cash, indicating tighter payout coverage compared to peers.
  • For the fiscal year ended June 28, total payouts of $5.122 billion exceeded the company's post-investment cash generation by approximately $231 million.
Full Analysis
Lam Research (NASDAQ:LRCX) and Applied Materials are compared regarding their cash flow coverage for shareholder payouts, specifically buybacks and dividends. In the quarter ended June 28, Lam generated $1.457 billion in operating cash, leaving $1.268 billion after capital expenditures. However, combined repurchases of $246.6 million and dividends of $325.3 million consumed 45.1% of this residual cash. On a full-year basis for the fiscal year ended June 28, Lam generated $5.858 billion in operating cash, resulting in $4.891 billion after capital spending. Total payouts of $5.122 billion exceeded this residual amount by approximately $231 million, indicating that the company's full-year distributions were not entirely covered by that year's post-investment cash flow. Analyst commentary notes that while Lam's latest quarter showed tighter coverage compared to Applied Materials, its full-year excess suggests a need for disciplined repurchases or stronger cash conversion. The article highlights trailing free-cash-flow multiples of 69x for Lam versus 59x for Applied and discusses hedge fund positioning changes, noting that investors should monitor cash generation across multiple quarters to assess payout sustainability.