On Thursday, BofA Securities adjusted its outlook on KLA Corporation (NASDAQ:KLAC), a key player in the semiconductor industry, by increasing its price target from $740.00 to $850.00. The firm continues to endorse a Buy rating for the stock. The revision reflects heightened confidence in KLA's growth trajectory and margin expansion potential.
The upgrade comes after BofA Securities hosted meetings with KLA's top executives, including CEO Rick Wallace and CFO Bren Higgins, which were well-received by investors in Boston and Toronto earlier this week. The discussions emphasized KLA's strong position in the market, particularly in the process control sector, where it holds a dominant 57% market share, quadrupling that of its nearest competitor.
KLA's financial health was highlighted by its industry-leading 61% gross margins, outpacing the average peer margin of 47%. Additionally, the company's services business, which accounts for 25% of its sales, was noted for its double-digit annual growth, contributing to KLA's robust performance.
The firm's analysis suggests that KLA is well-aligned with the increasing complexity of chip manufacturing and packaging over the next decade. This trend, coupled with the ongoing reshoring of semiconductor fabrication plants that rely on KLA's equipment for yield improvement, positions the company for sustained growth. KLA's core semiconductor sales have grown at a compound annual growth rate of 15% over the past five years, surpassing the wafer fab equipment industry's 9% CAGR.
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