KLA is set for further market share gains in the semiconductor equipment market, according to Morgan Stanley. Analyst Shane Brett upgraded KLA to overweight from equal weight and lifted his price target by $122 to $870. His new forecast implies 29.2% potential upside for the company. KLA has a majority share of the process control market within the wafer fabrication equipment, or WFE, industry, which involves machines inspecting semiconductor wafers. Given its competitive standing, Brett forecasts KLA to exceed industry WFE forecasts on “structural and idiosyncratic drivers” throughout the next couple of years. “We expect KLA to outgrow WFE in 2025-2026 and see a rich catalyst path for a re-rating,” Brett said, modeling KLA’s revenue to grow at 8% and 12%, respectively, in the next two years. According to the analyst, the two catalysts that should support KLA’s revenue growth are process control intensity and market share increase. Brett said KLA’s market share in the process control intensity should increase going forward given the industry’s transition toward larger die sizes and increased design starts, which leads to lower yield, or a higher percentage of nonfunctional or low-quality chips. Larger die sizes refers to a greater size of the integrated circuit on a chip, which means the chip could boast a higher performance but potentially have more defects, for example. This benefit for KLA from these trends is evident so far with the company’s performance mirroring Taiwan Semiconductor Manufacturing’s capex spending. “KLA’s share of TSMC capex and memory share has increased and we expect share to increase at TSMC and memory share to recover from 2024 going forward,” Brett said. He added that “[market] share increase, where KLA should continue to gain market share in process control given the company is first to inflections, has the fundamental technology to enable that, and the data processing capabilities to keep customers, all combining to deepen KLA’s moat.” KLA shares are up 6.9% this year, outperforming the broader market. The stock is down more than 2% over the past year, however. KLAC 1Y mountain KLAC stock performance. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
