Part 2

Lam Research (LRCX)

Company Background

Lam Research Corporation is an American corporation that engages in the design, manufacture, marketing, and service of semiconductor processing equipment used in the fabrication of integrated circuits. Its products are used primarily in front-end wafer processing, which involves the steps that create the active components of semiconductor devices (transistors, capacitors) and their wiring (interconnects). The company also builds equipment for back-end wafer-level packaging (WLP), and for related manufacturing markets such as for microelectromechanical systems (MEMS).

Lam Research is dedicated to the success of its customers by being the world-class provider of innovative technology and productivity solutions to the semiconductor industry. Since 1980, Lam Research has played a key role in contributing to the extraordinary pace of innovation in the semiconductor industry.

The company’s market-leading products and services enable its customers to build smaller, faster, more powerful, and more power-efficient electronic devices—the kind that are driving the proliferation of technology into our everyday lives.

Current position – Financial Performance & Future Growth Prospects

Lam Research is one of the best, most prominent and fastest growing companies in the Semiconductor industry, with a great Financial Profile and a very attractive valuation with respect to its future growth trajectory. The company is a pure secular growth story as its entire business is focused on servicing fast growing segments like data transport, analysis and storage. In addition to that, we are currently undergoing a major technological transformation as a society with the mass 5G adoption, IoT, AI, Autonomous driving etc.. All of that creates a very favorable environment for Lam Research as a leader in the industry that it operates in. With the continued innovation in the technology space and the mass adoption of these new, more powerful and faster technology systems, there will be a significant increase in the demand for more powerful NAND microchips and processors, which will continue to drive the top-line growth of the company. Furthermore, persistent Foundry strength remains a major positive. Lam is also seeing a strong demand in key electronic categories, including PCs, storage and networking, which contributes to the great overall performance of the company. The company’s core DRAM and NAND products have been in high demand as a result of the global transition to a new type of data-enabled economy, with new, more modern and better operating tools and systems.

Just like any other semiconductor company, Lam Research has also struggled with the global microchip shortage that is present in the space currently, but thanks to its relatively low indebtedness, its high profitability and efficiency levels, the company has managed to navigate this supply crisis better than most of its competitors. We’ve recently heard from the likes of other semiconductor players like Micron, Qualcomm etc. that the chip shortage might stay around for a bit longer. However, these companies’ CEO’s also pointed out that their companies have done what was necessary to adjust their businesses to the current environment and are confident that demand for their products will only continue to increase going forward. Furthermore, President Biden has explicitly stated that a certain portion of the large Infrastructure Bill that he is after, will be indeed dedicated to the development of better and more efficient semiconductor manufacturing centers. This will help the US to become less dependent on its Asian business partners for the microchips and processors that it needs.

All of that is a net positive for Lam research and is expected to push the stock higher in the 2nd half of 2021.

Technical Analysis

LRCX has been in a clear long-term uptrend ever since it bottomed at around $182 per share in the COVID-19 stock market crash in March, 2020. As a technology company with a great long-term growth trajectory LRCX’s stock has been extremely attractive for both institutional and retail investors. The stock has managed to appreciate from the $182 lows all the way up to the $672 level breaking new all-time highs almost every week in the meantime. This represented an astonishing 269% stock price increase in a little over a year. The long term bullish momentum behind the stock is quite strong and it will most likely continue to push the price higher in the future. However, the key technical level to watch at the moment is the $675 horizontal all-time high resistance as a potential upward break there could easily open up the door for a move up to $800 and $925 respectively. We can see clearly from the Daily chart of the stock that it has been in the process of accumulating more bullish interest, as it has been consolidating between the $130-140 levels for over 3 months now. The stock is currently trading at its 50 EMA and above its 200 EMA with the RSI and Stochastics oscillators moving lower on the daily chart. This shows that if the 50 EMA gets clearly broken to the downside, the stock might drop down towards the 200 EMA which is currently lying at $535. However, the long term path of least resistance remains to the upside and any dips towards any of the strong dynamic and/or static support levels, should be used as a buying opportunity. We will stay bullish on the stock and will be interested in buying any dips for as long as the stock stays above the $500 psychological support zone. A potential break there could easily send the stock down towards the next major support at $380, thus we would be exiting our positions if the $500 support breaks.

Walt Disney (DIS)

Company Background

The Walt Disney Company is a diversified international family entertainment and media enterprise. It operates through a few different segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). Founded back in 1923 by Walt and Roy Disney, the company has got almost 100 years of history in producing quality content and making families and children happy all around the globe. Walt Disney’s products include: television, publishing, films, music, video games, amusement parks, broadcasting, and radio and web portals. The company has become a global leader in the sector it operates and that has been reflecting on its share price performance especially in the past few years. The stock was up 50% in the 2016-2020 period prior to the COVID-19 pandemic. Ever since DIS bottomed at the end of March, 2020 the stock has resumed its clear uptrend going and has even reached new all-time highs in March, 2021. Yet, 2019 has definitely been the best year for Disney so far with the stock rising 35%, beating the market’s benchmark S&P 500 and its 28% gain during that period of time.

Current position – Financial Performance & Future Growth Prospects

From a business standpoint, Disney+ has definitely been the company’s greatest success in the past couple years. The Walt Disney Company reported that Disney+ has 103.6 million subscribers worldwide as of Q2, 2021. This marks a growth in the service’s subscriber base of almost 80 million since the start of the fiscal year of 2020. The service launched in November 2019 and by the company’s first fiscal quarter of 2020 had already amassed more than 26.5 million subscribers.

The growing popularity of Disney+, is largely attributed to the strong content portfolio and the much cheaper bundle offering in comparison to Netflix. The company has made its platform available in some fast growing subscription regions like Nordics, Latin America and other Asian territories, which is expected to further expand its user base and also gain further market share. In addition to that, we need to emphasize on the fact that The Walt Disney Company is much more than just an online streaming platform, as it is the largest entertainment corporation in the world with many different consumer oriented businesses, which are all going to benefit from the reopening of the global economy. For example, the state of California will be opening its theme parks soon, which will materially boost Disney’s top-line growth. Furthermore, with movie theaters closed for more than a year now, people are eager to go and spend an evening out at the movies. The reopening of theaters as COVID-19 restrictions are lifted will drive Disney’s studio business, which is again a positive catalyst for the company.

Technical Analysis

DIS has been in a clear long-term uptrend ever since it bottomed at around $79 per share in the COVID-19 stock market crash in March, 2020. As an entertainment conglomerate with a great long-term growth trajectory, remarkable portfolio of products and last but not least of course a world widely recognized and beloved brand name, Disney’s stock has been extremely attractive for both institutional and retail investors. The stock has managed to appreciate from the $79 lows all the way up to the $203 level breaking new all-time highs on few occasions in the process. This represented an outstanding 157% stock price increase in exactly 12 months. However, the stock has been in a downward corrective multi-week long trajectory since mid-March this year. It is currently resting right above its 200 EMA dynamic support zone. The long term bullish momentum behind the stock is quite strong and it will most likely continue to push the price higher in the future. However, the key technical levels to watch at the moment are the $185 and $203 horizontal and all-time high resistances as a potential upward break there could easily open up the door for a move up to $240 and $265 respectively. We can see clearly from the Daily chart of the stock that it has been in the process of accumulating a lot of additional bullish interest in recent weeks, as it has been building a very meaningful base around the $170 level. The stock is currently trading at its 5, 20, 50 and 200EMAs with the RSI and Stochastics oscillators moving sideways on the daily chart. This shows that if the 200 EMA gets clearly broken to the downside, the stock might drop down towards the $140 support area. However, the long term path of least resistance remains to the upside and any dips towards any of the strong dynamic and/or static support levels, should be used as a buying opportunity. We will stay bullish on the stock and will be interested in buying any dips for as long as the stock stays above the $165 psychological support zone. A potential break there could easily send the stock down towards the next major support at $140, thus we would be exiting our positions if the $165 support breaks.

Sincerely,

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