Is It Too Late To Consider KLA After Its Huge 2024 Share Price Surge?

• If you are wondering whether KLA is still a smart buy after its huge run, or if the easy money has already been made, you are not alone. That is exactly what we will unpack here.
• Despite a slight dip of 0.2% over the last week, KLA is up 7.9% over the past month, 92.2% year to date, and 401.2% over five years. This naturally raises questions about how much upside may still be available.
• Much of this momentum has been driven by investors crowding into semiconductor and AI related names, with KLA benefiting from its role in chip process control and metrology equipment. In addition, recurring discussions about long term wafer fab equipment spending and AI infrastructure build outs have kept sentiment in growth mode for names like KLA.
• KLA currently scores a 1 out of 6 on our valuation checks, suggesting that on most traditional metrics it is not obviously cheap. Next we will walk through different valuation approaches, then finish with a perspective that can help you go beyond the numbers to judge whether the stock still appears to offer value.

KLA scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: KLA Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting its future cash flows and then discounting them back to today, using a required rate of return. For KLA, the model starts with last twelve months Free Cash Flow of about $3.9 billion and then applies a two stage growth framework based on analyst forecasts and longer term extrapolations.

Analysts provide explicit estimates for the next few years, with Simply Wall St extending those projections out to around 2035. Under this approach, KLA’s Free Cash Flow is expected to rise to roughly $6.7 billion by 2030, with growth gradually slowing over time as the company matures.

When all these projected cash flows are discounted back, the model arrives at an intrinsic value of about $633 per share. Compared with the current market price, this implies the stock is roughly 93.2% above the level the cash flows would justify on these assumptions. This suggests KLA appears richly priced on a pure DCF basis.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests KLA may be overvalued by 93.2%. Discover 910 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for KLA.

Approach 2: KLA Price vs Earnings

For a profitable, mature business like KLA, the price to earnings ratio is a straightforward way to gauge how much investors are willing to pay for each dollar of current profits. In general, companies with faster and more reliable earnings growth and lower perceived risk can justify trading on a higher PE, while slower or more cyclical names tend to warrant a lower multiple.

KLA currently trades on a PE of about 37.9x. That is close to the broader Semiconductor industry average of roughly 36.8x and in line with peers around 38.3x. This suggests the market is valuing KLA similarly to other quality chip equipment companies. Simply Wall St also calculates a Fair Ratio of 28.6x, a proprietary estimate of what KLA’s PE should be once its earnings growth outlook, profitability, risk profile, industry positioning and market cap are factored in.

This Fair Ratio aims to improve on simple peer comparisons by tailoring the expected multiple to KLA’s specific fundamentals rather than assuming that all semiconductor stocks deserve the same valuation. With the current PE (37.9x) sitting well above the Fair Ratio (28.6x), KLA again screens as overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your KLA Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way for you to write the story behind your numbers by linking your view of KLA’s future revenues, earnings and margins to a financial forecast, a Fair Value estimate and, ultimately, a clear buy or sell decision based on how that Fair Value compares to today’s price.

On Simply Wall St’s Community page, used by millions of investors, Narratives are easy to create and update as new information like earnings, guidance or news headlines comes in, so your valuation framework stays dynamic rather than static.

For example, one KLA investor might build a bullish Narrative around accelerating AI and DRAM spending, assigning a Fair Value near the top end of recent targets. Another, more cautious investor might focus on tariff risks, China exposure and cycle volatility, anchoring their Fair Value closer to the low end. Narratives makes both perspectives explicit, comparable and actionable.

Do you think there's more to the story for KLA? Head over to our Community to see what others are saying!

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.

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