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On Monday, Cantor Fitzgerald maintained a positive outlook on Lam Research (NASDAQ:LRCX) and KLA Corp. (NASDAQ:KLAC) stocks, anticipating modest fourth-quarter earnings beats and raises. KLA Corp., currently valued at $95.39 billion, has demonstrated strong financial health according to InvestingPro analysis, with a robust GOOD rating. The firm expects both companies to exceed current market expectations, which predict a modest growth in Wafer Fabrication Equipment (WFE) for 2025, contrary to the buyside's anticipation of a 5% decline. Cantor Fitzgerald forecasts the WFE market to remain stable at $100 billion.
Analysts at Cantor Fitzgerald predict one final adjustment to the Calendar Year 2025 (CY25) earnings per share (EPS) estimates for both companies. They foresee Lam Research's CY25 EPS to align more closely with their projection of $3.65, compared to the consensus of $4.00, and for KLA's EPS to adjust nearer to their estimate of $29.50, versus the consensus of $30.27. This adjustment accounts for the anticipated $500 million impact on KLA due to China market conditions, which has not yet been reflected in the consensus model.
Despite these adjustments, Cantor Fitzgerald maintains its price target for Lam Research at $95, suggesting an approximate 17% upside from its current level. Similarly, the firm upholds its $800 price target for KLA Corp., indicating around a 5% potential upside. The analysts highlight that this could be the last cut in estimates for both companies.
KLA Corp. shares are expected to continue their upward trajectory, bolstered by commentary on the increasing intensity of process control by 75 basis points (N2 commentary). In contrast, investors are predicted to adopt a more optimistic stance towards Lam Research following the final estimate cut and leading up to the company's Analyst Day on February 19, 2025.
The report from Cantor Fitzgerald underscores the potential for both companies to outperform amidst a challenging and evolving semiconductor equipment market. KLA Corp. has maintained dividend payments for 20 consecutive years, with a current yield of 0.91% and impressive dividend growth of 30.77% over the last twelve months. According to InvestingPro's Fair Value analysis, KLA is currently trading slightly above its Fair Value, though analyst targets suggest further upside potential. The maintained price targets reflect confidence in the companies' ability to navigate market headwinds and capitalize on industry developments. For deeper insights into KLA's valuation and 12+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Taiwan Semiconductor Manufacturing Co. (TSMC) announced a robust capital expenditure (capex) target for 2025, exceeding analysts' projections and influencing a rise in shares for semiconductor equipment manufacturers, including ASML (AS:ASML). ASML, known for its advanced lithography systems, is expected to benefit from TSMC's focus on advanced packaging, which accounted for over 8% of TSMC's 2024 revenue and is projected to increase to 10% this year.
In analyst developments, Needham upgraded KLA Corporation's stock rating from Hold to Buy, reflecting confidence in KLA's performance and its ability to outshine competitors. The firm also noted KLA's strong financial health, highlighted by a 22.93% return over the past year and a 59.75% gross profit margin.
On the other hand, Western Digital Corp (NASDAQ:WDC) shares fell due to a pessimistic earnings forecast from industry peer Micron Technology (NASDAQ:MU), raising concerns about weakening demand in the semiconductor sector. These are some of the recent developments in the semiconductor industry, providing investors with a snapshot of the sector's current landscape.
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