We Expect KLA To Fare Better Than Peers in Equipment Downturn; Shares Fairly Valued; FVE $410

KLA reported fiscal second-quarter sales slightly above management’s guidance, led by continued strength in the foundry and logic segments. Although the firm is not immune to the weaker demand environment for wafer fab equipment, we expect wide-moat KLA to outperform the overall WFE market in 2023 thanks to the firm’s greater exposure to leading-edge logic and foundry customers such as TSMC, Samsung, and Intel that will continue to ramp new process technologies despite macroeconomic headwinds. We are maintaining our fair value estimate of $410 per share and we see shares as fairly valued.