"We expect the September quarter to be the low point of our calendar year."
And with that quote, repeated last night on Mad Money, Martin Anstice, the redoubtable CEO of Lam Research (LRCX) , called the bottom in the semiconductor capital equipment cycle.
Why is it significant? Because in the previous quarter, he said there could be a couple of quarters of weakness.
While the downturn was, by his own admission, deeper than he expected, he did say that his biggest customers held back -- but can hold back no longer. There's just too much demand for the sophisticated chips that can be made with equipment from Lam.
Is Anstice going to be right? He sure acts like it, committing to a very aggressive buyback -- and buybacks speak louder than words.
The only issue for me is August 16, the day that competitor Applied Materials (AMAT) reports, and that can be brutal for Lam if AMAT falls flat like last quarter. That, plus the fact that flash memory keeps falling in price, may mean that Anstice could be early when it comes to the stock.
Now, if you bet with Lam, you are betting against Micron Technology's (MU) price. Lam sells at 10x earnings, a remarkably low multiple for a remarkable growth company. I say that because Micron's stock sells at 4.5x earnings, the cheapest stock in the S&P 500. That's because people expect that flash and DRAM chip prices are about to collapse so that the low multiple will turn into a high multiple.
I can't see a bottom in Lam's stock if Micron's numbers collapse, even as Lam counts a ton of Asian clients that may be at different points in the Internet of Things cycle.
Martin is confident that the big semi companies are maintaining their discipline, meaning they are not going to flood the world with chips in boom-bust fashion.
If he is right, the stock, which is almost 50 points down from its high but up 2% for the year, has an awful lot to gain.
If he is wrong, I actually do not see a lot of downside. But, and this is a big but, why not just buy Micron and bet that it makes a comeback?
But they are.
Hold off for better prices.