KLA Jumps 22% in 3 Months: Is There More Room for the Stock to Grow?
KLA Corporation KLAC shares have jumped 21.7% in the trailing three-month period, outperforming the Zacks Computer and Technology sector’s drop of 2% and the Zacks Electronics-Miscellaneous Products industry’s appreciation of 9.3%. However, KLACKLAC-- shares have underperformed competitors, including MKS Instruments MKSI, Lam Research LRCX and Entegris ENTG over the same time frame due to unimpressive third-quarter fiscal 2026 guidance as well as operational headwinds.
KLA now expects third-quarter fiscal 2026 revenues of $3.35 billion (+/- $150 million), reflecting a modestly weak product mix on a sequential basis. The guidance reflects the rapidly escalating cost of DRAM chips used in KLA’s image processing computers that ship with its systems, thereby hurting gross margin. Increasing lead times of its products due to supply constraints and negative tariff impact, roughly 100 bps, are headwinds in the near term.
KLAC Stock’s Performance
Image Source: Zacks Investment Research
However, we believe KLAKLAC-- has enough fuel to continue its upward trajectory, given the company’s dominant process control market share, strong AI infrastructure investment, and momentum in advanced packaging.
KLA Prospect Rides on Strong Advanced Packaging Growth
KLA is benefiting from strong demand for leading-edge logic, high-bandwidth memory and advanced packaging, which is driving top-line growth. Advanced packaging revenues are expected to grow mid-to-high teens on a year-over-year basis in 2026. Strong investments in WFE and advanced packaging represent a strong growth opportunity for the company. Growth of advanced packaging supporting heterogeneous chip integration has become a new market for KLA, which is currently worth $11 billion and growing faster than core WFE.
KLA’s robust portfolio and its leadership in process control systems are enabling customers to manage increasing design complexity. Process control accelerates time to results by resolving process integration challenges during the fab ramp-up phase to optimize time to market for a diverse mix of semiconductor designs.
Moreover, the growing investment in custom silicon, particularly among hyperscalers developing their own custom chips, has led to a proliferation of unique device designs. This has put customers under pressure to deliver performance, volume and time to market, resulting in strong demand for advanced process control. This aids KLA’s prospects as each new chip design requires rigorous inspection, metrology and yield optimization solutions. This bodes well for the company’s top-line growth.
KLAC expects the core WFE market to grow in the high single to low double digits in 2026, reaching the low $120 billion range, up from approximately $110 billion in 2025. The company expects the advanced packaging component of the market to grow at a similar rate to roughly $12 billion for a total market forecast in the mid-$130 billion range, an increase in the low double digits versus its forecast for 2025.
KLAC’s Earnings Estimate Shows Positive Trend
The Zacks Consensus Estimate for third-quarter fiscal 2026 earnings is pegged at $9.15 per share, up 0.3% over the past 30 days and indicating 8.8% growth over the year-ago quarter’s reported figure. The consensus mark for third-quarter fiscal 2026 revenues is pegged at $3.38 billion, suggesting 10.3% growth from the year-ago quarter’s reported figure.
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $36.63 per share, up by a nickel over the past 30 days and indicating 10% growth from 2025’s reported figure. The consensus mark for fiscal 2026 revenues is pegged at $13.41 billion, suggesting 10.3% growth from the 2025’s reported figure.
KLA Shares Are Trading at a Premium
KLAC shares are trading at a premium, as suggested by a Value Score of F.
In terms of the forward 12-month price-to-earnings (P/E), KLAC is trading at 33.47X, higher than the broader sector and peers. The broader sector is trading at 24.59X while MKS InstrumentsMKSI-- and EntegrisENTG-- trade at 22.45X and 32.82X, respectively. However, Lam ResearchLRCX-- is pricey with a P/E multiple of 34.59.
KLAC Stock’s Valuation
Image Source: Zacks Investment Research
Technically, KLA is currently trading above the 50-day and the 200-day moving averages, indicating a bullish trend.
KLA Stock Trades Above 50-Day & 200-Day SMAs
Image Source: Zacks Investment Research
Conclusion
KLA benefits from strong demand for advanced packaging and robust AI demand that justifies a premium valuation.
KLA currently has a Zacks Rank #2 (Buy), which suggests that investors should start accumulating the stock right now as the stock is well-poised to accelerate in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.
Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.
Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.
See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
KLA Corporation (KLAC): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
MKS Inc. (MKSI): Free Stock Analysis Report
Entegris, Inc. (ENTG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Comentarios
Aún no hay comentarios