LRCX's $25B Buyback Spurs Rally, but WAIT Stance Unchanged

What happened

Lam Research announced a $25 billion share repurchase program, sending shares up 8.2% as the market reacted positively to the capital return signal. The buyback plan, which is substantial relative to the company's market cap, underscores management's confidence in future cash generation and its view that the stock is undervalued. Despite the strong AI-driven demand and record earnings cited in the article, the DeepValue master report highlights significant risks, including a concentrated China revenue base at 34–37% and an extremely high valuation with a P/E of 81.5 and EV/EBITDA of 85.3. While the buyback will reduce share count and support per-share metrics, it does not directly address the core concerns around export licensing restrictions and the sustainability of AI capex. Consequently, the fundamental thesis remains cautious, and the buyback does not change the WAIT rating.

Implication

The $25B buyback signals management's belief the stock is undervalued, but it does not address the core thesis risks. At 81x earnings, the market embeds a sustained AI-driven upcycle, while China exposure at 34–37% of revenue remains a key vulnerability. We maintain a WAIT rating and would prefer an entry near $360, where the risk/reward is more balanced. Key catalysts include the June quarter results and any clarity on China licensing. If China revenue share drops sharply due to restrictions, the downside becomes significant despite buyback support.

Thesis delta

The buyback announcement is a positive capital allocation signal but does not change the fundamental concerns that underpin our WAIT rating. It may provide per-share EPS support and reduce dilution, but it does not mitigate valuation risk or China exposure. Our thesis remains unchanged: we await either a lower entry price or evidence that China revenue can stabilize before becoming more constructive.