Skip to main content

Market Overview

Analyst Sees KLA-Tencor Having A Break Out Year In 2018

Share:
Analyst Sees KLA-Tencor Having A Break Out Year In 2018

After a strong performance throughout 2017, KLA-Tencor Corp (NASDAQ: KLAC) remains an underappreciated stock that will likely "break out" in 2018, according to at least one Wall Street analyst.

The Analyst

KeyBanc Capital Markets' Weston Twigg upgraded KLA-Tencor's stock from Sector Weight to Overweight with a $134 price target.

The Thesis

Many of KLA-Tencor's peers oversaw a large increase in 3D NAND capex which drove significant outperformance throughout 2017, but NAND capex growth is expected to decelerate to just 3 percent in 2018, Twigg said in a note. DRAM capex will likely be moderately higher at 9 percent which implies that KLA-Tencor will likely see a top-line growth profile that's more comparable to its peers in the coming years. But if foundry spending accelerates to support 7nm, or if the company sees traction with its new products, then it could see even higher growth rates.

Meanwhile, KLA-Tencor's margins profile will likely remain a best-in-class through fiscal 2019, the analyst said. Specifically, the company's margins will likely remain between 63 to 64 percent through fiscal 2019, which compares favorably to Applied Materials, Inc. (NASDAQ: AMAT) at 46 to 47 percent. The company's operating margin will likely remain between 37 to 40 percent over the same time period, which also compares favorably to Applied Materials at 29 to 30 percent.

KLA-Tencor's stock should trade at a premium valuation given a superior model. The analyst's new $134 price target implies an 18 times multiple on his C2018 EPS estimate of $7.44.

Price Action

Shares of KLA-Tencor were trading higher by around 1 percent Monday morning and are up nearly 35 percent since the start of 2017.

Related Links:

Barron's Looks Ahead To 2018

Analyst: For Applied Materials, 'Every Year Is A Peak Year'

Latest Ratings for KLAC

DateFirmActionFromTo
Feb 2021Wells FargoMaintainsEqual-Weight
Feb 2021Deutsche BankMaintainsHold
Feb 2021Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for KLAC
View the Latest Analyst Ratings

 

Related Articles (KLAC)

View Comments and Join the Discussion!

Posted-In: DRAM KeyBanc Capital Markets NANDAnalyst Color Long Ideas Upgrades Analyst Ratings Trading Ideas Best of Benzinga

Latest Ratings

StockFirmActionPT
LBCredit SuisseMaintains36.0
TRGPCredit SuisseMaintains40.0
SNOWCredit SuisseMaintains275.0
DARCredit SuisseMaintains95.0
CLRMKM PartnersDowngrades26.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com