GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
KLA looks cheap against its earnings: at 30x next year's earnings versus the roughly 38x chip-equipment makers usually get, it sits about 9% below the low end of a $224–$285 fair range. That range is 38x next year's $6.71 EPS, give or take 12%, and leans on the forecast, which is 83% above trailing earnings; on trailing earnings it trades at 56x. This is a valuation read only, with no fundamental work. x.com
KLA gains as more complex AI chips require more inspection before they ship. 3D stacking, advanced packaging and 2nm processes multiply checks in a market KLA says it owns almost entirely. Revenue rose 29% and EPS 39%; the next-quarter revenue guide of $4.7bn exceeds the $4.54bn expected, showing the promised second-half acceleration. Overweight, $300 target. x.com x.com
Accelerating earnings mean ASML is not expensive right now. It trades at 24x forward earnings and 19x forward EV/EBITDA. x.com
KLA has almost no upside even in a best case. Beating 2027 Street EPS estimates of $5 by 100% and applying a 30x multiple, a material premium to its history for the growth, leaves only 1.5% upside. x.com
KLA is a structural near-monopoly in semiconductor process control, not a cyclical equipment vendor, with about 56% of process control and over 85% of optical wafer inspection. It combines pricing power, rising process-control content per wafer as chips grow more complex, and a recurring services base whose lifetime revenue per tool exceeds the tool's original price. Whichever AI application wins, chipmakers must pay the KLA toll as long as they demand smaller, faster chips. x.com x.com
KLA's post-earnings selloffs are unjustified: its China issue is well known, and the company has disclosed no substantial change, positive or negative. Unless something highly damaging is announced, gaps down are buying opportunities, with shares nearing an all-time high. After its second-quarter report, KeyBanc saw a modest beat and a slightly above-consensus outlook, while Evercore ISI said supply-driven lead times may cap first-half upside. x.com
KLA and its chip-equipment peers are best bought at significantly lower valuations during a down cycle, so downside risk ahead matters more than near-term upside. KLA is only being built up slowly to fix an underweight versus Applied Materials, ASML, Lam Research and Tokyo Electron, with more added if it falls further, and no concern if it jumps back to $250 in the meantime. x.com
Lam Research's non-China demand growth and steady earnings estimates make its lower multiple a rebound setup if its guide holds. China's revenue share fell from 43% to 26% as Taiwan and Korea grew, while the fiscal 2027 earnings multiple fell from about 37x to 28x on nearly unchanged estimates. An in-line quarter and December guide near consensus would probably lift the stock; a guide below $8.5bn would back the selloff. x.com
Micron looks expensive on price-to-book at about 8x versus a historical average of about 2x, and relying on forward P/E for such a cyclical business can be dangerous. x.com
Semiconductor equipment makers such as Applied Materials, KLA and Lam Research look like shorts, a view Michael Burry now shares: per @zerohedge, Burry says he shorted Applied Materials, along with Tesla, Nvidia and, for the first time, Caterpillar. x.com
Aehr Test Systems' bull case looks overstated on a detailed financial model, summarized in a table for investors meeting CEO Gayn at the William Blair conference. x.com
