Growth is expected to outperform the wafer fabrication equipment market. Morgan Stanley upgraded KLA Corporation (KLAC.US) to "overweight".

Morgan Stanley has released a research report, upgrading KLA Corporation (KLAC.US) to a "hold" rating, and raising the target price from $748.00 to $870.00. Morgan Stanley is optimistic about KLA's growth potential in the Wafer Fabrication Equipment (WFE) sector. According to the company's analysis, they expect KLA's performance to outperform the WFE market, with projected revenue growth rates of 8% and 12% for 2025 and 2026, respectively. These data sharply contrast with the WFE market forecast, which predicts a 3% decline in 2025 and a 4% increase in 2026. The company has shown strong revenue growth of 12.15% over the past 12 months, but the current valuation suggests that the stock's trading price may be higher than its fair value. Morgan Stanley's confidence in KLA is based on two main factors. Firstly, the company believes that process control intensity is a key factor, as chip sizes increase and design starts rise, process control intensity is expected to experience structural growth, leading to lower yields and the need for more of KLA's services. Evidence supporting this view can be seen in KLA's share in the capital expenditure of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR and its growing influence in the memory field. The second driver is that KLA's market share in the area of process control may increase. The bank believes that KLA's position at the forefront of technological change, along with its core technology and data processing capabilities, will enable it to continue gaining market share. These strengths are seen as key factors that will further strengthen KLA's competitive moat in the industry. In addition to Morgan Stanley, Citigroup is also bullish on KLA, having previously released a research report maintaining a "buy" rating on KLA and raising the target price to $910. The reason is that the product development cycle has increased the attachment rate for wafer fabrication equipment. Citigroup analysts have also raised KLA's EPS forecasts for 2025 and 2026 by 13% and 14% respectively.