KLA-Tencor Corp KLAC reported earnings after the close Oct. 26. It managed to beat revenue and EPS expectations, but guidance fell below consensus.
The Analyst
Argus Research's Jim Kelleher initiated coverage of KLA-Tencor Corp with a Buy and $125 price target.
The Thesis
Rising demand for semiconductors and sophisticated semiconductor production tools will have a positive impact in 2018 on KLA-Tencor Corp, Kelleher said. (See Kelleher's track record here.)
The analyst said he expects the company to benefit from upgrades at customers' manufacturing plans and from industry expansion in China. Demand for equipment from DRAM and NAND flash memory chip makers is expected to remain strong, Kelleher said.
The stock has historically traded with a 2-percent premium to the market multiple and is presently trading with a discount to the historical norm, said Kelleher. He added that other historical comparables also signal that the stock is undervalued.
The Price Action
The stock fell $7.69 percent around noon Wednesday. Since then it managed to regain some ground and it is trading around 6 percent lower.
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Photo courtesy of KLA-Tencor Corp.
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