KLA-Tencor (KLAC.US) Sees Accelerated Orders Driven by HBM/Advanced Process Demand; JPMorgan Raises Target Price to $1,485

Stock News12-11

JPMorgan maintains an "Overweight" rating on KLA-Tencor (KLAC.US) with a target price of $1,485. Following discussions with KLA's management, JPMorgan observed continued improvement in the order book since the earnings release, projecting low-to-mid single-digit revenue growth for the first half of 2026, up from prior expectations of flat to slight growth. This acceleration is attributed to stronger recent orders, particularly in DRAM/HBM, alongside extended tool lead times. However, the team anticipates higher growth in the second half of 2026, with full-year wafer fab equipment (WFE) growth estimated at 10%-12%.

Beyond DRAM/HBM, KLA is experiencing robust spending momentum in advanced process foundry/logic, driven by key players like TSMC (2nm/3nm) and an expanding client base, including Intel (INTC.US), Samsung Foundry, and Rapidus. The company remains confident in sustained strong growth for its advanced packaging and HBM solutions in 2026, following a remarkable 70%+ surge in 2025. Overall, KLA targets $14 billion in revenue and $38 EPS for 2026, while JPMorgan's EPS forecast exceeds $39, expecting outperformance due to strong demand in advanced processes, logic/memory, and advanced packaging.

JPMorgan highlights that rising semiconductor manufacturing complexity has amplified demand for defect analysis and metrology solutions, with advanced chip designs becoming more sensitive to process variations, making monitoring "critical" areas essential. Additionally, KLA's acquisition of Orbotech has diversified its presence in PCB, SPTS, and advanced packaging markets.

With market expansion, share gains, technological leadership, and premium margins, JPMorgan projects a 15%-20% EPS CAGR over the next three years, expecting the stock to outperform peers. The $1,485 target assumes KLA achieves $45 EPS by late 2026, trading at the high end of its peer range (25-35x P/E).

Risks include cyclicality and intense competition in semiconductors, unpredictable demand-supply fluctuations, and potential downturns. Failure to innovate or execute on EUV mask inspection strategy could also threaten KLA's market position.

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