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KLA's Shares Plunge 14% in 3 Months: Should You Buy, Sell or Hold?
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KLA Corporation’s (KLAC - Free Report) shares have lost 13.7% over the past three months, underperforming the broader Zacks Computer and Technology sector’s return of 9.4%.
KLA's underperformance can be attributed to challenges in its PCB and Component Inspection segment. Export controls and geopolitical tensions are other headwinds.
However, the rising demand for advanced packaging, which enhances process control intensity, has been a positive development for KLAC. Increased investments across multiple nodes and higher capital intensity in the Foundry & Logic segment are fueling robust top-line growth.
Shares of Stardust Power, SES AI and Flux Power have plunged 43.3%, 46.3% and 56.5%, respectively. The industry has declined 27.8%.
KLA's strategic focus on integrating AI into its solutions is expected to drive its prospects.
KLA’s Prospects Ride on Strong Portfolio
KLA has seen a strong uptick in customer adoption of its advanced packaging solutions. It expects revenues from this product category to surpass $500 million in 2024, with further growth anticipated in 2025.
KLA is experiencing strong growth in its wafer inspection business, driven by increased demand for advanced applications that support leading-edge technology development. It remains optimistic about the wafer fab equipment market, projecting modest growth for 2024, with the market size expected to range between the mid to high $90 billion levels.
KLAC’s expanding portfolio, particularly with advancements in technology for integrated circuit substrate manufacturing, is noteworthy. These innovations enhance production capabilities and address the growing complexity of semiconductor designs, further strengthening KLAC's market position.
KLA's High Debt Level is a Concern
As of Sept. 30, 2024, KLA reported a total cash position of $4.63 billion but faced a significantly higher total debt of $6.7 billion. This disparity highlights a key concern regarding the company's financial structure as rising debt levels can pose challenges in managing liquidity.
Despite concerns about rising debt, KLA continues to generate robust cash flow. In the first quarter of fiscal 2025, the company generated $995.2 million from operating activities and delivered a solid free cash flow of $964.8 million.
KLAC Offers Positive Q2 Guidance
KLAC anticipates sequential revenue growth through late 2024 and into 2025, driven by increasing customer investments in advanced semiconductor applications. This outlook is reflected in its optimistic guidance.
For second-quarter fiscal 2025, revenues are expected to be $2.95 billion, plus/minus $150 million.
The Zacks Consensus Estimate for revenues is pegged at $2.93 billion, indicating 17.98% growth year over year.
KLA expects non-GAAP earnings of $7.75 per share, plus/minus 60 cents.
The consensus estimate for non-GAAP earnings is pegged at $7.78 per share, implying year-over-year growth of 26.30%.
KLAC’s Zacks Rank
KLAC currently carries a Zacks Rank #3 (Hold), indicating that it may be wise to wait for a more favorable entry point in the stock.
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KLA's Shares Plunge 14% in 3 Months: Should You Buy, Sell or Hold?
KLA Corporation’s (KLAC - Free Report) shares have lost 13.7% over the past three months, underperforming the broader Zacks Computer and Technology sector’s return of 9.4%.
KLA's underperformance can be attributed to challenges in its PCB and Component Inspection segment. Export controls and geopolitical tensions are other headwinds.
However, the rising demand for advanced packaging, which enhances process control intensity, has been a positive development for KLAC. Increased investments across multiple nodes and higher capital intensity in the Foundry & Logic segment are fueling robust top-line growth.
These factors have helped KLAC outperform the Zacks Electronics – Miscellaneous Products industry and peers, including Stardust Power (SDST - Free Report) , SES AI (SES - Free Report) and Flux Power (FLUX - Free Report) , over the same time frame.
KLA Corporation Price and Consensus
KLA Corporation price-consensus-chart | KLA Corporation Quote
Shares of Stardust Power, SES AI and Flux Power have plunged 43.3%, 46.3% and 56.5%, respectively. The industry has declined 27.8%.
KLA's strategic focus on integrating AI into its solutions is expected to drive its prospects.
KLA’s Prospects Ride on Strong Portfolio
KLA has seen a strong uptick in customer adoption of its advanced packaging solutions. It expects revenues from this product category to surpass $500 million in 2024, with further growth anticipated in 2025.
KLA is experiencing strong growth in its wafer inspection business, driven by increased demand for advanced applications that support leading-edge technology development. It remains optimistic about the wafer fab equipment market, projecting modest growth for 2024, with the market size expected to range between the mid to high $90 billion levels.
KLAC’s expanding portfolio, particularly with advancements in technology for integrated circuit substrate manufacturing, is noteworthy. These innovations enhance production capabilities and address the growing complexity of semiconductor designs, further strengthening KLAC's market position.
KLA's High Debt Level is a Concern
As of Sept. 30, 2024, KLA reported a total cash position of $4.63 billion but faced a significantly higher total debt of $6.7 billion. This disparity highlights a key concern regarding the company's financial structure as rising debt levels can pose challenges in managing liquidity.
Despite concerns about rising debt, KLA continues to generate robust cash flow. In the first quarter of fiscal 2025, the company generated $995.2 million from operating activities and delivered a solid free cash flow of $964.8 million.
KLAC Offers Positive Q2 Guidance
KLAC anticipates sequential revenue growth through late 2024 and into 2025, driven by increasing customer investments in advanced semiconductor applications. This outlook is reflected in its optimistic guidance.
For second-quarter fiscal 2025, revenues are expected to be $2.95 billion, plus/minus $150 million.
The Zacks Consensus Estimate for revenues is pegged at $2.93 billion, indicating 17.98% growth year over year.
KLA expects non-GAAP earnings of $7.75 per share, plus/minus 60 cents.
The consensus estimate for non-GAAP earnings is pegged at $7.78 per share, implying year-over-year growth of 26.30%.
KLAC’s Zacks Rank
KLAC currently carries a Zacks Rank #3 (Hold), indicating that it may be wise to wait for a more favorable entry point in the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.