AMAT - KLA Corp. rises as Wall Street praises 'superior business model' after strong Q4

2023-07-28 09:16:04 ET

KLA Corp. ( NASDAQ: KLAC ) shares rose more than 4% in pre-market trading on Friday after the semiconductor equipment maker reported strong fourth-quarter results, leading to praise from Wall Street.

"KLA once again demonstrated its superior business model as resilient demand for its Bare Wafer, Optical, and Reticle Inspection  tools and Services drove another beat and raise," Goldman Sachs analyst Toshiya Hari wrote in an investor note.

Hari maintained his buy rating and boosted his per-share price target to $540 from $456 after the results, adding that there are likely to be multiple architectural transitions (e.g. Gate-All-Around in advanced Logic/Foundry) that will "lead to higher Process Control intensity."

Competitor Lam Research ( LRCX ) also reported strong fourth-quarter results and better-than-expected guidance this week. Lam Research ( LRCX ) shares were up 1.5% in pre-market trading, while Applied Materials ( AMAT ) shares were up 2% .

JP Morgan analyst Harlan Sur, who has an overweight rating on KLA Corp. ( KLAC ), said the process control segment of the wafer fab equipment market, and the company itself, are faring better than the market itself.

"In addition to the strong trends in mature/specialty manufacturing, the team’s strong exposure to leading edge next-gen manufacturing development continues to drive strong demand for their solutions (bare wafer inspection business will be up Y/Y, pattern wafer and mask inspection businesses will be flat)," Sur wrote in an investor note. "

Sur added that KLA Corp.'s ( KLAC ) exposure to fast growing trends in advanced packaging and silicon carbide power "is helping to sustain the team’s specialty semi equipment segment."

Sur boosted his per-share price target to $560 from $445 following the results and reiterated that KLA Corp. ( KLAC ) is the firm's top pick in the semiconductor capital equipment space.

T.D. Cowen analyst Krish Sankar also raised his per-share price target on KLA Corp. ( KLAC ) after the results, moving to $535 from $410, noting that the quarterly results and guidance show the company is navigating the market well.

"KLAC continues to navigate the environment well while outgrowing [wafer fab equipment in 2023]," Sankar wrote in a note. "Exposure to process and fab R&D spending is helping it to weather the slowdown and long tool lead times offer some visibility for [second-half] demand."

For the period ending June 30, KLA Corp. ( KLAC ) earned an adjusted $5.40 per share on $2.36B in revenue, topping estimates of $4.86 per share in adjusted earnings and $2.35B in sales.

Looking ahead, KLA Corp. ( KLAC ) said it expects sales to be $2.35B, plus or minus $125M (above the $2.23B estimate), with non-GAAP gross margins 61%, plus or minus 100 basis points.

Adjusted earnings per share are expected to be $5.35 per share, plus or minus 60 cents, compared to the estimate of $4.75 per share.

More on KLA Corp.

• KLA Corporation 2023 Q4 - Results - Earnings Call Presentation
• KLA Corporation: Growing Market Share And Cash Flows
• KLA Corporation: Little Impact From China Sanctions On Semiconductor Equipment

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