The Analysts Drive KLA Corporation Higher
KLA Corporation (NASDAQ: KLAC) is riding high on a wave of business and analysts upgrades that we don’t see ending until 2023 at the earliest. The demand for semiconductors is so huge it is driving demand for the semiconductor fabrication and manufacturing equipment sold by KLA Corporation. In our view, the demand is not only driving the expansion of the business but a revolution in technology that will fuel an upgrade cycle once the current demand cycle comes back into balance. Until then, investors can rest well at night know KLA Corporation is a top pick in the industry.
The latest upgrade comes from Wells Fargo. Wells Fargo called out KLA Corporation as its top pick with the expectation chip manufacturers may face a choppy year of trading in 2022. Analyst Joe Quatochi upgraded the stock to Overweight from Equal Eight and set the new high target for the stock price of $500. This compares to the current Pricetargets.com consensus estimate of $420 which assumes about 3% of upside is available in the stock.
The consensus target has been edging higher over the 30 and 90-days, up more than 11.0% over the last 90-days, and is up nearly double from last year. In our view, based on obvious strength in the industry and trends within the analyst’s community, we see the consensus price target continue to move higher in the near to mid-term at least. The most recent technical price action suggests as much as $100 of upside is at hand or more than enough to exceed the new high target of $500.
The Bar For KLA Corporation Is High
The analysts are expecting to see KLA Corporation revenue accelerate on a sequential basis with YOY growth accelerating as well. The current consensus is calling for revenue of $2.33 billion or up 12$ sequentially, 41% YOY, and 51% versus two years ago. The 41% YOY growth expected for the quarter compares to 35% in the previous quarter and is the 4th consecutive quarter of accelerating. The consensus is also a company record and possibly not the last quarter of YOY acceleration. The comps start getting tougher as soon as the current quarter but sequential growth remains strong and the company has a history of beating the consensus. KLA Corporation has beaten the consensus estimate nearly 100% of the time over the 6 years and by a wide margin
KLA Corporation Is A Safe Dividend Grower
KLA Corporation is not a high-yield dividend payer at only 1.1% but it is a very safe yield and one of the most attractive yields in the technology sector. The company is paying out a mere 20% of its earnings estimate with outperformance as a matter of course. The balance sheet is very strong as well so there are no red flags to be worried about. The company is net-debt but debt is low, leverage is low, cash reserves are high, and coverage is high. Based on the 12-year history of dividend increases we are expecting another double-digit increase at the end of the fiscal year.
The Technical Outlook: KLA Corporation Waves A Bullish Flag
Shares of KLA Corporation are trending higher in the long, mid, and near-term and waving a Bullish Flag in the near-term. This pattern is worth as much as $100 of upside for the stock assuming it confirms to the upside. Price action is moving higher now, up more than 6.0% following the Wells upgrade, and the indicators are bullish. MACD and stochastic are a little weak after the recent consolidation but this is a good thing for the bulls as it provides some room for the market to run.
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