KLAC Faces Market Challenges Amid Strong Earnings and Analyst Optimism
KLA Corporation (KLAC), based in Milpitas, California, stands as a key player in the semiconductor and electronics sectors, boasting an impressive market cap of $85.5 billion. The company specializes in advanced inspection, metrology, and data analytics systems, which are essential for the reliability and efficiency of semiconductor devices.
Stock Performance Compared to Major Indices
Over the past year, KLAC shares have lagged behind the broader market. The stock has risen 16%, while the S&P 500 Index ($SPX) has gained nearly 31.3%. In 2024, KLAC is up 10.9%, in contrast to SPX’s rise of 25.5% year-to-date.
Comparison with Semiconductor ETFs
When looking specifically at the VanEck Semiconductor ETF (SMH), KLAC’s performance seems even more disappointing. The ETF has delivered a substantial 50.6% increase over the last year and has outperformed KLAC with gains of 39.3% year-to-date.
Impact of U.S.-China Trade Relations
The stock’s underperformance can largely be attributed to uncertainty surrounding U.S. efforts to limit semiconductor technology supplies to China. Recently, a bipartisan committee urged the Commerce Department to restrict access, citing threats posed by China’s military progress.
Recent Earnings Report and Market Reaction
On October 30, KLAC announced its first-quarter results for fiscal 2025, resulting in a 3.7% drop in shares the following day. Revenue hit $2.8 billion, an 18.5% increase year-over-year. The company projected $2.95 billion for the next quarter, which exceeds analyst expectations by 3.5%. Non-GAAP earnings per share stood at $7.33, surpassing estimates by 4%.
Future Earnings Expectations
For the current fiscal year ending in June 2025, analysts anticipate a 30.2% year-over-year growth in KLAC’s EPS, bringing it to $30.91 on a diluted basis. Historically, the company has consistently outperformed earnings expectations, recording beats in all four previous quarters.
Analysts’ Consensus and Price Targets
Among the 26 analysts covering KLAC stock, the overall rating is a “Moderate Buy,” which includes 14 “Strong Buy” ratings, one “Moderate Buy,” and 11 “Hold” recommendations.
Encouragingly, this outlook is an improvement from a month prior when only 13 analysts recommended a “Strong Buy.” On October 31, TD Cowen lowered KLAC’s price target from $760 to $725 while keeping a “Hold” rating, noting vigorous spending in the foundry/logic areas at 2nm/3nm nodes and strong demand for services backing high-teen percentage growth in the second half of the fiscal year.
The mean price target for KLAC is $828.67, indicating a potential upside of 28.5% from current prices, with the highest target set at $977, suggesting an upside of 51.6%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are intended solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
