Analyst Note| Abhinav Davuluri, CFA |
KLA reported fiscal fourth-quarter results at the high end of management’s guidance, led by continued strength in the foundry and logic segments and improved memory spending. Consistent with KLA’s peers and our internal estimates, management now expects the wafer fab equipment, or WFE, market to be up at least 30% in calendar 2021 (up from mid-20s). KLA’s leading position in process diagnostic and control has served it well, as the firm is highly leveraged to the strategic R&D investments by customers for leading-edge process technologies across all chip types. We are raising our fair value estimate for wide-moat KLA to $360 per share from $315 as we incorporate a stronger growth outlook for 2021 and beyond. We view shares as modestly undervalued.