KLA Corp KLAC seems poised to benefit from a strong logic/foundry demand environment, while a recovery in memory could lend additional upside in 2020, according to KeyBanc Capital Markets.
The Analyst
KeyBanc’s Weston Twigg maintained an Overweight rating on KLA while raising the price target from $149 to $152.
The Thesis
KLA reported healthy results for the fourth quarter, citing an improving demand environment from logic and foundry customers, although memory continues to be weak, Twigg said in the note.
While management reiterated their expectation of a decline in overall industry equipment demand in 2019, logic/foundry revenues are expected to grow 35% sequentially in the second half of the year.
The analyst further mentioned that the company’s GM and EPS guidance for first quarter are higher than the current consensus expectations, driven by product mix and opex synergies from the recent Orbotech acquisition.
Twigg expects the upcoming investor event, scheduled for Sept. 17, to be a catalyst.
“KLAC appears to be executing well with its Orbotech acquisition (despite some softness exacerbated by the Huawei ban), and we anticipate a compelling update to its financial target model at the event," he wrote in the note.
The analyst raised the EPS estimate for 2020 from $9.05 to $9.42.
Price Action
Shares of KLA were trading up 7% to $135.25 at time of publishing on Tuesday.
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