UPDATE: Deutsche Bank Initiates Coverage On KLA-Tencor On Fair Valuation

In a report published Monday, Deutsche Bank analyst Sidney Ho initiated coverage on

with a Hold rating and $68.00 price target. In the report, Deutsche Bank noted, “KLAC is a well-run company with a strong market share in process control of the WFE market. It generates industry-high margins and cash flow, and places high priority on shareholder returns. KLAC should benefit from a continued increase in WFE spending over the next 2-3 years, driven by multiple technology inflections. Recently, KLAC raised the bar for capital allocation through a leveraged recapitalization and a special dividend. These shareholder-friendly actions support the re-rating of KLAC above the 5-year average P/E excash of 11x. However, we believe the shares trading at 17x our CY15E EPS exspecial dividend are fairly valued with limited EPS leverage.” KLA-Tencor closed on Friday at $70.66.