Analyst Note| Abhinav Davuluri, CFA |
KLA reported fiscal third-quarter results in line with management’s guidance. While KLA’s customers in China returned to full production in late March, greater economic uncertainty related to COVID-19 in other regions from both a supply and demand perspective have clouded the firm’s outlook. That said, management confirmed customer demand for wafer fab equipment has been strong in the first half of 2020. 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 logic, foundry, and memory. Ongoing technology transitions and the implementation of EUV lithography that both require advanced inspection tools from KLA give us confidence in the firm’s forward prospects amid an uncertain period. We are maintaining our fair value estimate for wide-moat KLA at $160 per share.