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KLA Stock Surges 84% Year-to-Date: Is the Rally Sustainable?
29 Nov
Summary
- KLA stock has achieved an 84.6% year-to-date gain.
- Advanced packaging market growth targets KLA's 2025 revenue.
- KLA's P/E ratio of 36.5x exceeds industry average.
KLA has experienced an impressive surge in its stock value, boasting an 84.6% gain year-to-date and a substantial three-year total shareholder return of 210.8%. This upward momentum is largely attributed to the burgeoning advanced packaging market, characterized by the adoption of 2.5D/3D architectures and High Bandwidth Memory (HBM). KLA's revenue target for this segment in 2025 has been significantly revised upwards, indicating a belief that this trend is in its nascent stages and poised for multi-year expansion.
Despite the positive outlook, questions arise about KLA's current valuation. While one narrative suggests the stock is undervalued with a fair value of $1,287, another perspective highlights a price-to-earnings ratio of 36.5x. This figure surpasses both the semiconductor industry average of 36.1x and an estimated fair ratio of 33.1x, raising concerns about potential valuation risk.
Further complicating the outlook are KLA's exposure to China's decelerating demand and the ongoing effects of global tariffs. These macroeconomic factors could pose challenges to future growth trajectories, prompting investors to carefully weigh the potential upside against these inherent risks.
