KLA Earnings: We Raise Our Fair Value Estimate to $670 From $530, but Shares Remain Overvalued

We raise our fair value estimate for wide-moat KLA to $670 per share from $530, after raising our long-term growth assumptions. We expect a chip market upcycle to drive strong short-term growth, with some additional upside from artificial intelligence chip development. We now expect double-digit growth for KLA in both fiscal 2025 and fiscal 2026, with growth tapering to a midcycle level of around 7% thereafter. Longer-term, we continue to expect cyclicality in KLA’s results in the semiconductor market. In our view, shares have traded predominantly on rosy short-term expectations and have ignored longer-term cyclicality. We continue to see KLA as a high-quality dominant force in process control chip equipment, but see its valuation as challenging even after raising our assumptions.