On Tuesday, Stifel maintained a positive stance on KLA Corporation (NASDAQ:KLAC), a leading supplier of semiconductor equipment, by raising its stock price target to $760 from $685 and reaffirming a Buy rating.
The adjustment reflects Stifel's strategy to value companies based on peak anticipated earnings during the upcycle of the semiconductor equipment sector, which is viewed as a growth se-cyclical industry.
The firm's analyst highlighted the preference for companies with exposure to memory production, such as Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX), as well as those linked to derivative supply chains like Ichor Holdings (NASDAQ:ICHR), and advanced packaging specialists like Onto Innovation (NYSE:NYSE:ONTO) and Camtek (NASDAQ:CAMT).
KLA, known for its inspection and metrology equipment, is considered resilient to market downturns. The analyst pointed out that leading semiconductor manufacturers typically prioritize strategic investments in research and development, with budgets for process control and inspection being allocated early in the transition to leading-edge nodes.
The expectation of a competitive environment in advanced foundry-logic, the increasing adoption of extreme ultraviolet (EUV) lithography, including in DRAM manufacturing, and imminent technological shifts in transistor and interconnect designs are seen as factors contributing to sustained high demand for KLA's process control solutions.
This anticipated demand underpins the analyst's willingness to assign a premium valuation to KLA due to its visibility, margin structure, and resilience.
InvestingPro Insights
Amid Stifel's optimistic outlook for KLA Corporation (NASDAQ:KLAC), the InvestingPro platform offers nuanced insights into the company's financial health and market performance. With a robust market capitalization of $93.88 billion and a Price/Earnings (P/E) ratio standing at 35.04, KLA's valuation reflects a significant earnings expectation from the market.
This is further evidenced by a Price/Book ratio of 30.67, suggesting a premium placed on the company's net assets. Despite a challenging revenue growth environment, as indicated by a -7.75% change in the last twelve months as of Q2 2024, KLA has demonstrated a strong gross profit margin of 59.76%, underscoring its efficiency in managing production costs.
InvestingPro Tips highlight that KLA has maintained dividend payments for 20 consecutive years, with an 11.54% dividend growth in the last twelve months as of Q2 2024, reinforcing its commitment to shareholder returns.
Furthermore, the company's stock has seen a 1-year price total return of 86.25%, reflecting a significant appreciation in value, which aligns with the analyst's perspective on the company's resilience in the market.
For investors seeking a deeper analysis, InvestingPro provides additional tips that cover various aspects of KLA's performance and forecasts. These include insights into earnings revisions, sales projections, and the company's standing within the semiconductor industry.
To access these insights and more, consider subscribing to InvestingPro using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 19 additional InvestingPro Tips available, investors can make more informed decisions about their interest in KLA Corporation.
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