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Lam Research Corporation (LRCX) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Lam Research Corporation (LRCX)

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Intrinsic Value (DCF)

Current$217.47
→
Intrinsic$147.04
-32%
$98.79$147.04$242.92
Market implies 33% growth for 5 years
Current price reflects execution expectations above 22% growth — not unreasonable for quality businesses.
At $217, the market prices in continued strong cash flow growth (33%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $99 → Bull $243. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →18%20%22%24%
8%$185$200$217$234
10%$126$136$147$158
12%$95$103$110$119
14%$76$82$88$94

Bull Case

  • Bull case ($243) offers 12% upside at 27% growth, 8% discount

Bear Case

  • Bear case ($99) implies 55% downside at 18% growth, 12% discount
  • Price reflects 33% growth expectations vs 22% historical — high bar to clear
  • Trading 32% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$6.63B
Year 2$8.11B
Year 3$9.93B
Year 4$12.16B
Year 5$14.88B
Terminal$235.79B

📐 Model Inputs

Growth Rate22.4%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$5.41BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is LRCX stock undervalued or overvalued?
🔴 OVERVALUED

LRCX trades at $217.47 vs. our DCF-derived intrinsic value of $110.59, implying -47% downside. Using a 9.5% WACC and 22.4% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($163.45) suggests limited upside.

What is LRCX's intrinsic value?

Using a 5-year DCF model: Base FCF of $5.41B, projected at 22.4% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-1.63B net debt and dividing by 1.29B shares: Bear $74.54 | Base $110.59 | Bull $163.45. Current price $217.47 implies -47% to base case.

How is LRCX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 22.4% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($141.05B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.