Semiconductor equipment shares are falling in midday trading after Evercore analyst CJ Muse said his recent checks suggest risk Lam Research's (LRCX) near-term shipments due to pushouts from memory makers. Muse reduced his estimates for Lam, stating that calendar 2018 EPS is now tracking 7% below consensus, but added that he views this pause as only temporary and does not see this changing his long-term thesis given he expects a recovery in NAND memory capex into the end of the year and first half of 2019 time frame. Muse thinks the downside risk is limited and would be an "aggressive buyer" of Lam shares if this issue prompts a pullback, he added. STORM CLOUDS FOR MEMORY CHIP MAKER MICRON: Just about a week ago, on May 31, shares of memory chip heavyweight Micron (MU) fell after Morgan Stanley analyst Joseph Moore downgraded the stock to Equal Weight as he said he sees "storm clouds on the horizon." The analyst argued that the continued strength in DRAM looks priced in and a NAND recovery in the second half of the year looks "increasingly unlikely." On the same day in May, Micron's CEO Sanjay Mehrotra said industry fundamentals are "healthy" given the structural changes that are contributing to sustained positive dynamics. Demand is being driven by "diverse" markets such as data center, mobile, automotive and Internet of Things while the industry supply outlook supports "long-term stability." OTHER ANALYST VIEWS ON MEMORY: On June 6, Longbow analyst Joe Wittine re-established coverage of Micron with a Neutral rating, stating that while DRAM fundamentals are "excellent" and valuation is at a trough, he expects the normalization in the DRAM cycle to create some drag on investor sentiment and Micron shares. Wittine, who sees parallels between today's DRAM setup and the mid-2017 peak of the NAND cycle, said he could become more constructive on Micron shares with either an unexpected improvement in industry fundamentals or a pullback in the stock price toward $50 per share. PRICE ACTION: Shares Lam Research are near session lows down over 6% to $186.90 per share, while Micron shares are dipping over 1% to $58.80. OTHERS TO WATCH: Shares of other companies in the space are lower including KLA-Tencor (KLAC), Applied Materials (AMAT), ASML (ASML), Western Digital (WDC), and Seagate (STX).
