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Fundamental Analysis: KLA CORPORATION (#KLAC)

KLA Corporation is a capital equipment company based in Milpitas, California. It supplies process control and yield management systems for the semiconductor industry and other related nanoelectronics industries.

💡 KLA Corporation #KLAC Released Q4 2020: Revenue and EPS beat consensus and analysts expectations. The strong results were driven by stronger-than-expected demand for process control, due to a sustained production in foundry models llogic chip manufacturing. The results were also fuelled by a sharp recovery in memory chip manufacturing (+ 40% in compared to Q3).

⚡️ Growth factors:

  • KLA's Q2 guidance also came out above consensus thanks to strong demand in Foundry, DRAM and PCB segments, signaling diversified business and strong manufacturing cycles.

  • Throughout 2021, KLA expects growth in revenue from the production of semiconductor wafers by an average of 14-16% equivalent to $ 68-69 billion. This is confirmed by the preliminary forecast of JP Morgan analysts, and the report of Lam Research on the stable level of foundry models and recovery of costs for the production of chips memory (mainly due to DRAM).

  • The impressive scale of R&D and the availability of the necessary equipment to raise production levels, allowing the company to continue to grow its market share.

📖 Financial indicators:

  • PE vs Industry: KLAC is good value based on its PE Ratio (32.6x) compared to the US Semiconductor industry average (36.3x).

  • Short term liabilities: KLAC's short term assets ($ 5.2b) exceed its short term liabilities ($ 2.0b)

  • Long term liabilities: KLAC's short term assets ($ 5.2b) exceed its long term liabilities ($ 4.8b)

  • Debt Level: KLAC's debt to equity ratio (117.3%) is considered high.

✅ KLA Corporation #KLAC

🎯 Target price - $ 335, upside potential + 17%.

💎 KLAC is one of the analyst favorites for its diversified product portfolio, robust revenue growth, efficient financial model and increased return on investment.

OTB Global Investments

London, 5 March 2021

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