The analysts lifted their price target for the Milpitas, Calif., company's stock to $500 from $360. It recently traded at $402.30, up 4%.
“KLA is well positioned to drive continued WFE [wafer fabrication equipment] outperformance,” they wrote in a commentary.
That will be “driven by accelerating leading edge foundry/logic spending, as capital intensity remains elevated, and competition reaccelerates, with Intel (INTC) - Get Intel Corporation Report targeting to regain process leadership,” the analysts said.
“With incremental [earnings before interest in taxes] in the 40% to 50% range, we believe [the] shares will be driven by potential forward-estimate upside.”
Morningstar analyst Abhinav Davuluri likes KLA, too, assigning it a wide moat, though he puts fair value at $396.
“KLA dominates the process diagnostic and control segment of the semiconductor equipment industry,” he wrote Oct. 27.
“With a 55%-plus share in the [process diagnostic and control] market and installed base of 44,000 tools, KLA-Tencor has built its leading technical expertise and extensive knowledge base into a wide economic moat.
“These competitive advantages have allowed the firm to maintain its technological edge through a large research and development budget and close relationships with customers to identify future needs in the PDC space."
Meanwhile, Wells Fargo affirmed Micron Technology (MU) - Get Micron Technology, Inc. Report as a top pick in light of its earnings strength. Wells Fargo has an overweight rating on the stock and a $115 price target. The Boise, Idaho, chipmaker's shares recently traded at $89.12, up 9%.