KLA (KLAC) AI Stock Analysis

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KLA

(NASDAQ:KLAC)

77Outperform

KLA's overall stock score is driven by its robust financial performance and positive earnings outlook. While technical indicators show potential short-term weakness, the company's strong market position and strategic growth initiatives underpin its long-term potential. High valuation metrics are a concern but are partly mitigated by the company's solid earnings and cash flow generation.

Positive Factors

Financial Performance

KLA reported a strong beat-and-raise quarter and conservatively guided a $3B/qtr revenue run-rate through CY25, which represents 11% total revenue growth.

Growth Prospects

KLA is expected to outgrow wafer fabrication equipment due to structural and idiosyncratic drivers.

Market Share

KLA should continue to gain market share in process control due to its fundamental technology and data processing capabilities, deepening its competitive advantage.

Negative Factors

China Export Restrictions

China restrictions pose a risk, with a $500 million impact expected from the export restrictions, leading to a projected 28% decline in 2025 China revenue.

Remaining Performance Obligations

KLA's reported Remaining Performance Obligations (RPO) showed a decrease of 9% quarter over quarter, largely impacted by China export restrictions.

Revenue Decline

KLAC management reiterated that China revenue could decline by low-20s percent in CY25, and the China revenue contribution will fall from 41% in CY24 to 29% in CY25.

KLA (KLAC) vs. S&P 500 (SPY)

Market Cap

$76.61B

Dividend Yield1.09%

Average Volume (3M)1.09M

Price to Earnings (P/E)24.2

Beta (1Y)1.79

Revenue Growth12.19%

EPS Growth20.80%

CountryUS

Employees15,000

SectorTechnology

Sector Strength40

IndustrySemiconductors

Share Statistics

EPS (TTM)23.78

Shares Outstanding132,886,750

10 Day Avg. Volume991,050

30 Day Avg. Volume1,090,081

Financial Highlights & Ratios

PEG Ratio1.17

Price to Book (P/B)N/A

Price to Sales (P/S)8.66

Price to Cash Flow (P/CF)27.60

P/FCF Ratio27.60

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$832.58

Price Target Upside44.41% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering20

KLA Business Overview & Revenue Model

Company DescriptionKLA Corporation (KLAC) is a leading provider of process control and yield management solutions for the semiconductor and related nanoelectronics industries. The company operates primarily within the technology sector, focusing on developing advanced inspection and metrology systems that enable manufacturers to improve productivity and quality in the fabrication of semiconductor devices. KLA's core products and services include a range of equipment and software designed to identify and correct defects and variations in semiconductor wafers, reticles, and integrated circuits.

How the Company Makes MoneyKLA Corporation generates revenue primarily through the sale of its high-performance inspection and metrology systems, as well as software solutions that are critical in the semiconductor manufacturing process. The company earns money by providing these cutting-edge tools to semiconductor manufacturers who require precision and efficiency in their production processes. Additionally, KLA offers maintenance, support, and consulting services, which provide a steady stream of recurring revenue. The company's earnings are significantly influenced by the ongoing demand for semiconductor devices, driven by technological advancements and the proliferation of electronics in various industries. KLA also benefits from strategic partnerships and collaborations with major semiconductor manufacturers and research institutions, which help drive innovation and adoption of its solutions.

KLA Financial Statement Overview

Summary

KLA's financial performance is strong, with high profitability margins, robust revenue growth, and efficient cash flow generation. The balance sheet shows manageable leverage levels, though it relies on debt financing. Overall, the company demonstrates solid financial health, supporting its strategic initiatives.

Income Statement

Very Positive

KLA demonstrates strong profitability with a consistent gross profit margin and a solid net profit margin. The revenue growth is robust over the years, indicating strong market demand and operational efficiency. EBIT and EBITDA margins also remain high, showcasing effective cost management.

Balance Sheet

Positive

The balance sheet reflects a moderate debt-to-equity ratio, indicating manageable leverage levels. Return on Equity (ROE) is impressive, highlighting effective use of equity capital. However, the equity ratio is somewhat low, suggesting a reliance on debt financing.

Cash Flow

Very Positive

Cash flow statements reveal strong operating cash flows and a positive free cash flow trajectory. The operating cash flow to net income ratio is healthy, indicating efficient cash generation relative to earnings. Free cash flow growth is robust, supporting future investments and debt servicing.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
10.84B	9.81B	10.50B	9.21B	6.92B	5.81B
	Gross Profit
6.53B	5.88B	6.28B	5.62B	4.15B	3.36B
	EBIT
4.26B	3.64B	3.99B	3.65B	2.52B	1.76B
	EBITDA
4.52B	3.91B	4.41B	4.01B	2.85B	2.10B
	Net Income Common Stockholders
3.21B	2.76B	3.39B	3.32B	2.08B	1.22B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.55B	4.50B	3.24B	2.71B	2.49B	1.98B
	Total Assets
3.79B	15.43B	14.07B	12.60B	10.27B	9.28B
	Total Debt
745.61M	6.82B	5.89B	6.66B	3.44B	3.47B
	Net Debt
202.11M	4.84B	3.96B	5.08B	2.01B	1.49B
	Total Liabilities
1.57B	12.07B	11.15B	11.20B	6.90B	6.60B
	Stockholders Equity
2.22B	3.37B	2.92B	1.40B	3.38B	2.67B
Cash Flow		Free Cash Flow
3.36B	3.03B	3.33B	3.01B	1.95B	1.63B
	Operating Cash Flow
3.65B	3.31B	3.67B	3.31B	2.19B	1.78B
	Investing Cash Flow
-554.17M	-1.48B	-486.87M	-876.46M	-500.40M	-258.87M
	Financing Cash Flow
-2.90B	-1.78B	-2.83B	-2.26B	-1.50B	-1.30B

KLA Technical Analysis

Technical Analysis Sentiment

Negative

Last Price576.53

Price Trends

50DMA

715.91

Negative

100DMA

688.50

Negative

200DMA

726.32

Negative

Market Momentum

MACD

-7.82

Positive

RSI

42.89

Neutral

STOCH

24.65

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KLAC, the sentiment is Negative. The current price of 576.53 is below the 20-day moving average (MA) of 688.14, below the 50-day MA of 715.91, and below the 200-day MA of 726.32, indicating a bearish trend. The MACD of -7.82 indicates Positive momentum. The RSI at 42.89 is Neutral, neither overbought nor oversold. The STOCH value of 24.65 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KLAC.

KLA Risk Analysis

KLA disclosed 38 risk factors in its most recent earnings report. KLA reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

KLA Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LRCX	78 Outperform	$75.85B	17.96	50.42%	1.51%	13.21%	27.25%
KLAC	77 Outperform	$76.61B	24.25	96.81%	1.09%	12.19%	20.80%
AMAT	76 Outperform	$103.14B	16.61	35.19%	1.26%	4.45%	-10.01%
ASML	76 Outperform	$239.76B	29.08	48.13%	0.94%	2.53%	-3.33%
TSM	74 Outperform	$734.69B	20.84	29.96%	1.32%	29.98%	35.76%
Sector *	57 Neutral	$18.54B	9.84	-14.38%	2.71%	5.07%	-23.65%
INTC	52 Neutral	$86.56B	―	-18.31%	2.52%	-2.08%	-1212.72%

* Technology Sector Average

Performance Comparison

KLAC

KLA

576.53

-108.18

-15.80%

AMAT

Applied Materials

126.95

-80.34

-38.76%

ASML

ASML Holding

605.55

-370.19

-37.94%

INTC

Intel

19.85

-17.74

-47.19%

LRCX

Lam Research

59.09

-36.58

-38.24%

TSM

TSMC

146.80

5.56

3.94%

KLA Earnings Call Summary

Earnings Call Date: Jan 30, 2025 | % Change Since: -22.17% | Next Earnings Date: Apr 24, 2025

Earnings Call Sentiment Positive

KLA reported strong revenue growth, profitability, and cash flow for 2024, with notable achievements in advanced packaging and services. However, the company faces challenges due to U.S. export controls impacting China revenue and the completion of flat panel business shipments. Despite these challenges, KLA provided solid guidance for 2025, demonstrating resilience and market leadership.

Highlights

Record Revenue and Market Growth

KLA's 2024 revenue grew 12% to a record $10.85 billion. Process control revenue grew over 12%, indicating increased market share, while the services business grew 15% to $2.5 billion.

Strong Profitability and Cash Flow

KLA maintained industry-leading gross and operating margins at 61% and 41%, respectively. The company grew free cash flow to $3.4 billion and returned $2.9 billion to shareholders through dividends and share buybacks.

Advanced Packaging Growth

KLA's advanced packaging revenue grew to approximately $500 million in 2024 and is expected to exceed $800 million in 2025, up from the previous estimate of $750 million.

Services Business Milestone

KLA's service business grew to $667 million in the December quarter, marking 50 consecutive quarters of growth, with an 18% year-over-year increase.

Solid Guidance for 2025

Total revenue for the March quarter is expected to be $3 billion, up 27% year-over-year at the midpoint. Non-GAAP gross margin is forecasted to be 62%, and non-GAAP diluted EPS guidance is $8.05 plus or minus $0.60.

Lowlights

Impact of U.S. Export Controls on China

The recent U.S. government export controls are expected to impact KLA's revenue in 2025 by approximately $500 million, with roughly 70% of the impact affecting the systems business.

Flat Panel Business Exit

KLA will complete the shipment of systems for its flat panel business by the end of the current quarter, affecting growth in the EPC segment.

Potential Licensing Delays

There are significant delays in processing licensing requests by the U.S. government, which may affect KLA's ability to mitigate the revenue impact from export controls.

Company Guidance

During the KLA Corporation December Quarter 2024 Earnings Conference Call, the company provided guidance for the fiscal year 2025, highlighting several key metrics. Revenue for the December quarter reached $3.08 billion, surpassing the midpoint of their guidance, and non-GAAP diluted EPS was $8.20 with a GAAP diluted EPS of $6.16. The company's gross margin was reported at 61.7%, and operating expenses totaled $596 million, comprising $342 million in R&D and $254 million in SG&A. KLA's free cash flow for the quarter was $757 million, with a free cash flow margin of 31%. Looking ahead, KLA expects the WFE market to grow by a mid-single-digit percentage in 2025, driven by investments in leading-edge logic and high-bandwidth memory, despite a $500 million revenue impact from recent export controls in China. Their March quarter guidance includes a total revenue forecast of $3 billion, plus or minus $150 million, and a non-GAAP gross margin of 62%, plus or minus 1 percentage point. Throughout 2025, KLA plans to maintain significant product development investments to support anticipated revenue growth, with operating expenses projected to increase by approximately $15 million incrementally per quarter.

KLA Corporate Events

Business Operations and StrategyFinancial DisclosuresRegulatory Filings and Compliance

KLA Maintains Guidance Amid New U.S. Export Rules

Neutral

Dec 3, 2024

The U.S. Department of Commerce has introduced new rules that could impact semiconductor equipment sales to China, prompting companies to review their business strategies. Despite potential challenges, one company is maintaining its financial guidance for the December 2024 quarter and plans to discuss the broader implications of these rules at upcoming investor conferences.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.