Nucor earnings beat by $0.08, revenue fell short of estimates
On Friday, TD Cowen’s Krish Sankar increased the price target on KLA Corporation (NASDAQ:KLAC) to $770 from $725, while maintaining a Hold rating on the stock. Sankar’s decision followed KLA’s announcement of results and guidance that surpassed expectations. With a market capitalization of $101.68 billion and a strong financial health score according to InvestingPro, KLA has demonstrated robust performance with 12.15% revenue growth in the last twelve months. The firm’s analysis suggests that the risks associated with China could be substantially mitigated as early as the first quarter of the current year. Additionally, the intensity of Process Control in the production of next-generation 2nm Gate-All-Around (GAA) semiconductors is reportedly exceeding expectations.
Sankar noted that KLA’s guidance was bolstered by strong spending in the DRAM and Foundry/Logic sectors, coupled with a significant sequential growth in NAND, which is anticipated to rise 78% into March but remains 55% below the levels of the previous cycle. KLA anticipates that by the calendar year 2025, China will account for 29% of its total sales, a decrease from 41% in the calendar year 2024. As a prominent player in the Semiconductors & Semiconductor Equipment industry, KLA has maintained strong fundamentals with a healthy current ratio of 2.36 and operates with moderate debt levels. For deeper insights into KLA’s financial metrics and comprehensive analysis, consider accessing the detailed Pro Research Report available on InvestingPro. This projection aligns with an expected 20% reduction in China’s revenue, consistent with TD Cowen’s estimates for China’s wafer fabrication equipment spending for the year.
The analyst highlighted that a 100 basis point increase in Process Control intensity for a 2nm GAA fabrication facility could translate to an approximate $200 million increase in the Process Control Total (EPA:TTEF) Addressable Market (TAM) for every 100,000 wafers per month. The enhanced use of inspection tools in GAA technology is essential to ensure the complete removal of Silicon Germanium and to detect minuscule defects that could otherwise damage more costly wafers. It was estimated that wafers for GAA technology could cost an additional $7,000 compared to those used for 3nm logic wafers.
Despite these positive indicators, TD Cowen’s earnings per share (EPS) estimates for KLA Corporation in the calendar year 2025 remain roughly unchanged at $30.6 per share. The new price target of $770 is based on a 25 times multiple of the estimated EPS for the calendar year 2025. Currently trading at a P/E ratio of 34.88, InvestingPro analysis suggests the stock is slightly overvalued at current levels, though it maintains impressive dividend growth of 30.77% and has raised dividends for 9 consecutive years.
In other recent news, KLA Corporation has seen a series of positive revisions and upgrades. Stifel has raised the company’s stock target to $825, maintaining a buy rating, while Cantor Fitzgerald increased the target to $875. Needham also raised KLA’s price target to $830, following the company’s strong quarterly performance and future projections. Morgan Stanley (NYSE:MS) and Goldman Sachs followed suit, raising their price targets to $748 and $864, respectively.
These adjustments come after KLA’s robust financial performance, with the company’s revenue growth estimates for 2025 raised to 10.5% year-over-year. KLA’s management also expects a surge in leading-edge logic manufacturing, which could expand KLA’s share in the wafer fabrication equipment market by 2025.
Despite headwinds from China affecting KLA’s equipment sales and service growth, the company’s financial strength appears stronger than initially anticipated. This is reflected in the revised price targets from various analyst firms, including Stifel, Cantor Fitzgerald, Needham, Morgan Stanley, and Goldman Sachs. These are the recent developments in KLA Corporation’s financial trajectory.
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