KLA (KLAC) has delivered returns that have caught investors' attention this year, with shares climbing 73% year to date. These gains come as the company continues to expand its footprint in the semiconductor equipment market.
KLA has built impressive momentum this year, with the stock’s 73% rally making waves among tech investors and pointing to renewed optimism about the sector’s growth potential. While shorter-term share price returns have been modest, its 1-year total shareholder return still highlights robust gains over the longer run as investors continue to bet on semiconductor demand staying strong.
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But with the stock trading near its recent highs, the big question is whether these impressive gains reflect KLA’s true value, or if the market is already factoring in all the company’s future growth prospects, leaving little room for upside.
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Most Popular Narrative: 13% Overvalued
With KLA's last close at $1,101.55 and the most-followed narrative assigning fair value at $972.48, the market price sits well above what consensus expects. The numbers set the stage for a deeper look into what is driving this valuation divide.
The advanced packaging market is experiencing early-stage, secular growth fueled by adoption of 2.5D/3D architectures and HBM, driving KLA's advanced packaging revenue target for 2025 up nearly 80% year-over-year with expectations that this trend is "closer to the beginning than the end." This directly expands KLA's addressable market and should provide multi-year upside to revenue.
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However, challenges such as weaker revenues from China and escalating global tariffs could quickly undermine KLA's momentum and put pressure on the company's future growth outlook.
Another View: Sizing Up Value from a Different Angle
Now let us look at our DCF model, which estimates KLA's fair value at $613.88. This is significantly below the current share price. While market optimism may often drive a premium, this lower fair value suggests that recent gains could be stretching expectations. Will the market prove the model wrong, or is caution warranted?
If you want a different perspective or believe in charting your own course, you can create a personal narrative from the data in just a few minutes. Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding KLA.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.
Valuation is complex, but we're here to simplify it.
Discover if KLA might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide.
