Lam Research (LRCX) is positioned to capitalize on a cooling trade war, with the U.S. and China reaching a temporary pause and reduction in tariffs. This development alleviates pressures on the semiconductor industry, which has been impacted by supply chain disruptions and uncertain business conditions. LRCX, a key player in semiconductor equipment, stands to benefit from increased demand for chip manufacturing as global tensions ease. With an attractive valuation, strong profitability, and a recent breakout signaling optimal timing for adding bullish exposure in a recovering sector. Trade timing The timing for adding bullish exposure to LRCX is optimal, as the stock recently broke above its bearish trendline resistance around $82, signaling a reversal. This breakout, combined with outperformance in both its sector and the S & P 500, suggests further upside potential to its $113 target, making this an attractive entry point with a strong risk-to-reward profile. Fundamentals LRCX trades at a discount to its industry despite superior profitability, positioning it as an undervalued name with significant upside potential in a recovering semiconductor market. Forward PE ratio: 21.1x vs. industry median of 24.7x Expected EPS growth: 15.4% vs. industry median 16.6% Expected revenue growth: 10.8% vs. industry average 10.9% Net margins: 27.2% vs. industry average 10.4% Bullish thesis Trade war relief : The temporary pause and reduction in tariffs between the U.S. and China have boosted demand for semiconductor equipment and benefiting LRCX’s growth outlook. Attractive valuation : LRCX’s attractive valuation combined with a strong net margins position it as an undervalued leader in the semiconductor space. Institutional accumulation : LRCX is outperforming both its sector and the S & P 500, reflecting strong momentum and potential institutional accumulation. Options trade To capitalize on LRCX’s potential upside, I’m buying a June 27 $85/$95 Call Vertical @ $3.01 Debit. This entails: Buying the June 27 $85 call @ $4.10 Selling the June 27 $95 call @ $1.09 The maximum reward is $699 if LRCX is above $95 at expiration. The maximum risk is $301 if LRCX is below $85 at expiration. The breakeven point for this trade is $88.01. View this Trade with updated prices at OptionsPlay . This strategy positions you to benefit from LRCX’s anticipated rally, leveraging its technical breakout, attractive valuation, and the easing of trade war tensions to profit from a high-quality semiconductor name with defined risk. With LRCX outperforming its sector, this call vertical offers a compelling opportunity to capture upside potential in a recovering market. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
