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KLA Corporation (KLAC), headquartered in Milpitas, California, commands a prominent position in the semiconductor and electronics industries with its $85.5 billion market cap. The company excels in delivering cutting-edge inspection, metrology, and data analytics systems, which are pivotal in ensuring the reliability and efficiency of semiconductor devices.
Shares of KLAC have underperformed the broader market over the past year. The stock has gained 16% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.3%. Also, in 2024, KLAC is up 10.9% compared to SPX’s 25.5% rise on a YTD basis.
Narrowing the focus, KLAC has also outperformed compared to the VanEck Semiconductor ETF (SMH). The exchange-traded fund has gained about 50.6% over the past year. Moreover, the ETF’s 39.3% gains on a YTD basis outshines the stock’s returns over the same time frame.
KLAC’s underwhelming price action over the past year can be attributed to the uncertainty following reports of U.S. efforts to restrict semiconductor technology supplies to China. Recently, a bipartisan letter urged the Commerce Department to block such access, citing concerns over China's military advancements.
On Oct. 30, KLAC released its fiscal 2025 first-quarter results, and its shares dropped 3.7% in the following trading session. It reported $2.8 billion in revenue, an 18.5% year-over-year increase. The company also provided strong revenue guidance of $2.95 billion for the next quarter, 3.5% above analyst forecasts. Non-GAAP earnings per share reached $7.33, surpassing consensus estimates by 4%.
For the current fiscal year, ending in June 2025, analysts expect KLAC’s EPS to grow 30.2% year over year to $30.91 on a diluted basis. The company's earnings surprise history is robust. It beat the consensus estimate in all four quarters.
Among the 26 analysts covering KLAC stock, the consensus rating is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings, one “Moderate Buy,” and 11 “Holds.”
This configuration is more bullish than a month ago, with 13 analysts suggesting a “Strong Buy.”
On Oct. 31, TD Cowen reduced KLAC’s price target from $760 to $725 while maintaining a “Hold” rating, citing strong foundry/logic spending at 2nm/3nm nodes and robust services demand that supported high-teen percentage growth in H2 over H1, despite another beat-and-raise quarter.
The mean price target is $828.67, representing a premium of 28.5% compared to KLAC’s current price levels. The Street-high price target of $977 suggests an upside potential of 51.6%.
