KLA Records Impressive Results and Guidance Despite China Restrictions; Shares Undervalued, $410 FVE

KLA reported fiscal 2023 first-quarter sales at the high end of management’s guidance, led by continued strength in the foundry and logic segments. Concerning the latest U.S. restrictions on exports to China, management said a meaningful amount of KLA’s business in China is in mature process technologies that are not the focus of the restrictions, though some systems and services will still be affected. The firm sees $100 million in lost sales to China in the December quarter and about $600 million-$900 million in calendar 2023, which represents about 10%-15% of total revenue. This is consistent with our estimates and factored into our unchanged $410 fair value estimate.