Argus has raised its price target on shares of KLA Corporation (NASDAQ: KLAC) to $875 from the previous $800 while maintaining a Buy rating on the stock on the back of KLA exceeding consensus expectations with its fiscal fourth-quarter 2024 performance, which showcased the first year-over-year growth in both sales and non-GAAP EPS after five quarters.
The semiconductor equipment manufacturer reported that, although foundry and logic demand saw a moderation during the fiscal fourth quarter, the overall demand for the fiscal year remained positive.
Memory demand, on the other hand, has shown signs of a sequential recovery and experienced year-over-year growth in the quarter, indicating a potential upswing in demand.
KLA Corporation also revealed its strategic move to exit the flat panel display business. The decision comes as demand continues to rise for KLA's core offerings in process control and metrology. The company's wafer inspection tools, in particular, are performing well, outpacing overall industry revenue trends.
KLA Corporation has recently consolidated several product groups along with the appointment of Oreste Donzella as the new Chief Strategy Officer. Alongside these changes, KLA reported strong quarterly earnings that exceeded expectations, largely due to the development of advanced-node technologies and a rise in advanced packaging.
Analyst firms TD Cowen and JPMorgan have highlighted KLA's ability to capitalize on current industry dynamics and upgraded the company's share target.
The company's services segment has seen a significant uptick, contributing to strong growth. An emerging revenue opportunity has been identified in the Advanced Packaging (NYSE:PKG) market, estimated to reach approximately $500 million by 2024.
KLA's outlook for the September quarter is also optimistic, with revenue and earnings per share (EPS) projections exceeding expectations.
TD Cowen has increased its price target for KLA, maintaining a Hold rating on the stock, while JPMorgan has raised its price target for KLA shares, maintaining an Overweight rating. Both firms' revised price targets underscore KLA's solid performance amid a favorable industry environment.
InvestingPro Insights
Following Argus's recent price target increase for KLA Corporation, our InvestingPro Insights reveal additional factors that investors may consider. KLA has demonstrated a commitment to shareholder returns, having raised its dividend for 8 consecutive years, with a notable 11.54% dividend growth in the last twelve months as of Q1 2024. This aligns with the company's robust financial performance, including a 68.23% one-year price total return, which underscores its strong position in the market.
Moreover, the company's strategic decision to focus on its core competencies in process control and metrology is reflected in its financial metrics. KLA's gross profit margin stands at an impressive 59.97%, and its return on assets is a healthy 18.72%. These figures indicate efficient operations and profitability, further bolstering the company's investment appeal.
For investors looking to dive deeper into KLA's financial health and future prospects, additional InvestingPro Tips are available, including insights on the company's earnings revisions and valuation multiples. To explore these tips and more, visit https://www.investing.com/pro/KLAC. And if you're considering upgrading to a yearly Pro or a yearly or biyearly Pro+ subscription, don't forget to use the coupon code PRONEWS24 to get up to 10% off. With 15 additional InvestingPro Tips listed, there's a wealth of information to help guide your investment decisions.
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