On Monday, Deutsche Bank (ETR:DBKGn) adjusted its price target on Lam Research (NASDAQ:LRCX) shares, increasing it slightly to $76 from the previous $75, while keeping a Hold rating on the stock. The firm's analyst noted a mixed performance in the semiconductor capital equipment (semicap) sector for 2024 and anticipates a similarly uneven market into 2025.
The revised price target reflects a cautious stance given the uncertainties in the industry. According to InvestingPro data, KLA Corporation stands out as a prominent player in the sector, with robust revenue of $10.26 billion in the last twelve months.
The report highlighted a decrease in the forecast for the worldwide foundry equipment (WFE) market for the calendar year 2025, now expecting it to remain flat year-over-year, as opposed to the previous growth estimate of 5%. The adjustment is based on various factors impacting the industry, with a majority posing negative effects. The analyst emphasized the importance of being selective in investing within the semicap sector due to the challenging nature of assessing risk/reward profiles in the current cycle.
Additionally, the analyst's scenario analysis for calendar year 2026 suggests a broad range of potential outcomes for WFE, projecting a market size between $94 billion and $117 billion. This wide range further indicates the volatile nature of the sector and the difficulty in making precise predictions.
In response to the fluctuating environment, Deutsche Bank has realigned its company-specific forecasts, now placing revenue estimates for Applied Materials (NASDAQ:AMAT), KLA Corporation (KLAC), and Lam Research approximately 2-5% below the consensus on the Street. The valuation methodology has also been updated to base on expected earnings per share (EPS) for calendar year 2026, rather than 2025.
While maintaining a cautious outlook on Lam Research and Applied Materials with Hold ratings, Deutsche Bank continues to favor KLA Corporation, expressing a preference for its defensive position with a Buy rating and a $725 price target.
InvestingPro analysis supports this view, showing KLA's strong financial health with a GOOD overall score and impressive dividend growth of 30.77%. The report concludes that the firm will uphold its Hold ratings on AMAT and LRCX until there is greater clarity regarding the timing and scale of a broader cyclical recovery within the semicap equipment sector. Investors seeking deeper insights into KLA's valuation and growth prospects can access the comprehensive Pro Research Report, available exclusively on InvestingPro, along with 10+ additional ProTips and detailed financial metrics.
In other recent news, KLA Corporation continues to demonstrate strong financial performance despite new regulatory challenges. The company has maintained its financial guidance for the December quarter of 2024, even with the imposition of additional licensing requirements on the export of certain semiconductor capital equipment to China by the U.S. Department of Commerce. KLA Corp's robust gross profit margin of 59.75% and current ratio of 2.13 indicate solid operational efficiency.
In the earnings arena, the company reported revenues of $2.84 billion and a non-GAAP diluted EPS of $7.33 for the September 2024 quarter, exceeding expectations. Additionally, KLA Corp announced a strategic transition plan for its Executive Vice President and Chief Strategy Officer, Oreste Donzella, who will assume a part-time senior advisory role from April 14, 2025.
Regarding analyst perspectives, JPMorgan (NYSE:JPM) remains bullish on semiconductor stocks, including KLA Corporation, despite new US-China rules. The firm projects a global WFE growth of over 5% and expects KLA Corporation to outperform this figure due to their expansion opportunities in next-generation leading-edge technologies. Concurrently, Citi analysts have issued a 'buy' rating for KLA Corporation, predicting a 9% year-over-year increase in global semiconductor sales in 2025.
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