KLA Corporation's (KLAC.US) orders accelerate in resonance with HBM/advanced process demands, JP Morgan raises target price to $1485.

JPMorgan Chase maintains a "overweight" rating on KLA Corporation (KLAC.US) with a target price of $1485. After meeting with KLA's management team, JPMorgan found that the order book has continued to improve since the company's earnings release, with revenue expected to achieve low to mid-single-digit growth in the first half of 2026, compared to previous expectations of flat to slightly positive growth. This is mainly due to the recent acceleration in orders, especially in the DRAM/HBM field, with tool delivery lead times also extending. However, the team still expects growth in the second half of 2026 to be higher than the first half, and overall wafer fab equipment (WFE) is expected to increase in 2026, with JPMorgan estimating growth at around 10%-12%. In addition to strong performance in the DRAM/HBM field, KLA maintains a strong spending trend in the advanced process wafer foundry/logic chip field, primarily coming from Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (2nm/3nm) and expanding customer base (including Intel Corporation, Samsung Foundry, Rapidus, etc.). KLA remains confident in the continued strong growth of its advanced packaging and HBM solutions in 2026, as the business area achieved over 70% growth in 2025. Overall, KLA is confident in achieving revenue of $14 billion and earnings per share of $38 in 2026. Currently, JPMorgan's earnings per share expectation has exceeded $39, and they believe that performance next year is likely to exceed expectations due to the strong trends in advanced process wafer foundry/logic chips/memory and advanced packaging demand. JPMorgan believes that as semiconductor manufacturing complexity increases, there is a significant increase in demand for analyzing defects and metrology issues in IC manufacturing processes, with advanced chip design being more sensitive to minor changes in the manufacturing process, making monitoring of "critical" areas in chip design crucial. In addition, KLA has diversified its presence in the terminal markets such as PCB, SPTS, advanced packaging, etc., through the acquisition of Orbotech. JPMorgan believes that with the expansion of terminal markets, market share growth, leading technological position, and high-profit margins, the company is expected to achieve a compound annual earnings growth rate of 15%-20% over the next three years, with its stock price expected to outperform the average level within JPMorgan's coverage universe, hence maintaining an "overweight" rating. In terms of valuation, JPMorgan's target price of $1485 is based on KLA achieving earnings per share of $45 by the end of 2026, assuming a high-end multiple (25-35 times) within the peer range. However, KLA also faces some risks as it operates in the highly cyclical and competitive semiconductor industry, which may experience significant supply and demand fluctuations, with the timing, length, and severity of industry cycles being difficult to predict, and a downturn that could weaken customer demand. Furthermore, the industry market is constantly changing, and if KLA is unable to keep up with the rapid pace of change by developing new products and technologies, its business may be affected, especially if there are missteps in the execution of the extreme ultraviolet lithography mask detection strategy, which could shake its market leadership position.