KLA (KLAC): Assessing Valuation Following Wave of Analyst Upgrades and Renewed Sector Confidence

KLA (KLAC) shares moved higher after Barclays upgraded the company, highlighting its leading role in wafer fabrication equipment and its relative safety from China-related risks. Other analysts quickly echoed the renewed optimism, signaling a shift in sentiment.

See our latest analysis for KLA.

KLA’s strong 11.1% 1-month share price return and eye-popping 85.8% gain year-to-date reflect renewed momentum for this semiconductor equipment leader. Riding a wave of analyst upgrades and robust demand signals, KLA has delivered a stellar 77.4% total shareholder return over the past year, showing that both short- and long-term performance remain firmly in positive territory.

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But after such a powerful rally, is there real value left for new investors? Or has all of KLA’s growth already been factored into its soaring share price?

Most Popular Narrative: 15% Overvalued

At $1,182.82 per share, KLA’s current price stands well above the most widely followed narrative’s fair value estimate of $1,026.32. The stage is set for debate about whether strong recent gains can be justified by future financial achievement.

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.

AI spending rush, new architectures, and future margin uplift are all factors in play. What bold projections justify today’s price? See all the future growth levers and profit ambitions behind this fair value. Want to know the key variables shaping the bull case? Don’t miss how the narrative’s math could change your outlook.

Result: Fair Value of $1,026.32 (OVERVALUED)

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

However, rising global tariffs and weaker-than-expected China sales could quickly challenge KLA’s growth story and put future profit expectations under pressure.

Find out about the key risks to this KLA narrative.

Another View: DCF Model Paints a Harsher Picture

While the market and peer price-to-earnings ratios suggest that KLA is fairly valued among its competitors, the SWS DCF model presents a very different perspective. According to this approach, KLA's current share price is far above its estimated fair value, which may indicate significant overvaluation. Could this mean investors are getting ahead of fundamentals?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own KLA Narrative

If you want to dig into the numbers and see things differently, you can quickly build your own KLA story and make the analysis your own 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.

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