KLA Corp Shares Overpriced Amid Delayed Cyclical Upturn, Says Analyst

Shares of KLA Corp KLAC were moving slightly higher on Friday, after trading mostly in the red during the week.

While demand in the semiconductor industry is unlikely to exceed supply in a hurry, KLA’s shares “may be discounting a return to those record run-rate levels,” according to KeyBanc Capital Markets.

The KLA Analyst: Steve Barger downgraded the rating for KLA from Overweight to Sector Weight.

The KLA Thesis: While semiconductor demand may be bottoming, it's unclear whether a positive inflection will happen soon, Barger said in the downgrade note.

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“We don’t doubt a cyclical upturn is coming, but until it becomes evident, the primary result of the market rally is to make shares more expensive and disconnected from current fundamentals,” the analyst wrote.

“When the upturn comes, our semicap coverage should see a return to revenue growth resulting in operating leverage, margin expansion, and positive EPS revisions,” Barger stated. Till then, KLA’s stock valuation is not compelling, he added.

KLAC Price Action: Shares of KLA had risen by 0.08% to $461.15 at the time of publishing Friday.

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