KLA (KLAC): Assessing Valuation After Jefferies’ Top Pick Call and Earnings Beat-Driven Rally

KLA (KLAC) just got a confidence boost after Jefferies tagged it as a top pick for 2026, following earnings that topped expectations and sparked a wave of more upbeat analyst views.

See our latest analysis for KLA.

That call from Jefferies comes on top of a powerful run, with a roughly 13.5% 1 month share price return feeding into a near doubling of the year to date share price and a massive five year total shareholder return above 400%. This suggests momentum is still very much on KLA’s side, despite insider selling and occasional pullbacks.

If KLA’s surge has you thinking more broadly about chip winners, it could be a good moment to explore other high growth tech and AI stocks that might be building similar momentum.

But after such a powerful run and bullish analyst calls, is KLA still trading below what some might see as its true potential, or are investors already paying up for all the future growth the market can imagine?

Most Popular Narrative: 3.9% Undervalued

With KLA last closing at $1,245.67 against a most popular narrative fair value near $1,296.89, that framework still sees modest upside from here.

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.

Read the complete narrative.

Curious how a jump in capital intensity, a richer margin mix, and a surprisingly robust profit multiple all combine to support that price tag? The full narrative unpacks the exact growth runway and earnings power that underpin this fair value call.

Result: Fair Value of $1296.89 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that story depends on AI capex staying strong. Any sharper China slowdown or tariff shock could quickly challenge today’s upbeat assumptions.

Find out about the key risks to this KLA narrative.

Another Lens on Valuation

Step away from narratives and KLA suddenly looks stretched on earnings, with a 38.6x price to earnings ratio versus a 28.8x fair ratio and a 36.8x industry average. That premium leaves less room for disappointment if growth or margins come in softer than hoped.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own KLA Narrative

If you see things differently or want to dig into the numbers yourself, you can build a personalised view in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 2 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.

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