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On Thursday, Stifel analysts increased their price target on KLA Corporation (NASDAQ:KLAC) shares to $770 from the previous target of $750. Despite the price target hike, the firm kept a Sell rating on the stock. According to InvestingPro data, KLA currently trades at a P/E ratio of 29.1x and shows strong financial health with an overall score of "GOOD," though current market prices suggest the stock may be overvalued relative to its Fair Value. Stifel’s analysis follows KLA’s financial results for the third quarter ending in March, where the company reported a modest revenue increase and a better-than-expected earnings per share (EPS), attributed to stronger gross margins and operational expenditure control. The company maintains impressive profitability metrics, with a gross profit margin of 59.7% and return on equity of 97% over the last twelve months.
KLA anticipates revenue to stay consistent in the fourth quarter ending in June, with second-half revenue expected to mirror the first half. This trajectory positions KLA for a year-over-year semiconductor capital equipment system revenue growth in the mid-teens for the calendar year 2025, surpassing the company’s own mid-single digit growth predictions for the industry’s wafer fabrication equipment (WFE).
The company’s success is partly due to its engagement in areas experiencing AI-driven growth, such as advanced logic, high bandwidth memory/dynamic random-access memory (HBM/DRAM), and advanced packaging. These sectors are known for necessitating increased process control intensity. Regarding the impact of tariffs, KLA has forecasted a roughly 100 basis points per quarter hit to gross margins but still projects gross margins between 62-63% for the year, with no immediate effect on demand. Revenue from China, which made up 26% in the March quarter, is expected to rise to around 30% in the calendar year 2025.
Stifel’s revised price target of $770 is based on a 20 times multiple of their estimated EPS for the calendar year 2026, reflecting their view that KLA’s consistent performance and strategic market position merit a relative premium. InvestingPro subscribers have access to 12 additional key tips about KLA, including its 9-year dividend growth streak and comprehensive analysis of its market position. Get the full picture with the detailed Pro Research Report, available exclusively to subscribers, covering what really matters about KLA’s financial health, valuation, and growth prospects.
In other recent news, KLA Corporation reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $8.41 compared to the anticipated $8.07. The company also exceeded revenue forecasts, reporting $3.06 billion against the expected $3.01 billion. Despite these strong financial results, KLA’s stock experienced a decline in aftermarket trading. Additionally, KLA announced a new $5 billion share repurchase authorization, indicating confidence in its future prospects. The company continues to focus on AI-related semiconductor investments, which are expected to drive growth, as noted by CEO Rick Wallace. Furthermore, KLA’s advanced packaging revenue is projected to exceed $850 million in 2025. The company has also highlighted potential risks, including global trade uncertainties and economic volatility. Lastly, KLA maintains a strong market position, as noted in industry reports, with continued share leadership in wafer equipment and process control markets.
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