Analyst Note| Abhinav Davuluri, CFA |
KLA reported fiscal fourth-quarter results in line with management’s guidance, led by continued strength in the foundry and logic segments. In contrast, memory spending has remained weaker during the first half of calendar 2020, but we anticipate a recovery beginning sometime in the December quarter and continuing into 2021. KLA’s leading position in process diagnostic and control has served it well more recently, as the firm is highly leveraged to the strategic R&D investments by customers for leading-edge process technologies across all chip types. Ongoing technology transitions and the implementation of EUV lithography both require advanced inspection tools from KLA, giving us confidence in the firm’s growth trajectory. We are raising our fair value estimate for wide-moat KLA to $190 per share from $160 as we incorporate a stronger growth outlook.