Lynx sees SK Hynix results rekindling interest in this chip stock

Lam Research's stock has been on the rebound after SK Hynix released impressive results, reigniting investor interest in the chip equipment maker, according to Lynx Equity Strategies. Analyst KC Rajkumar reiterated a $400 price target on the stock, noting that the recent sell-off was exacerbated by concerns about AI debt spreads and slowing growth in the AI sector.

However, Rajkumar believes the underperformance will not last long, as long-term holders are expected to add to their positions at the current levels due to expected share buybacks. SK Hynix announced it will return $75 billion to investors and has sold out its DRAM and HBM supply through 2029, indicating strong AI-related demand.

Other positive indicators include Ultra Clean Holdings and Seagate's reports, as well as significant deal-making by firms like SpaceX, Meta, and Broadcom. Rajkumar expects a resurgence in depressed multiples once election risks subside. The $400 price target is based on a 30 times estimate of the firm's 2029 earnings per share, discounted to the present, with a long-term path to $500.

Rajkumar maintains that there is no reason to trim the price target, contrasting with other analysts' opinions.