Key Bank believes that the large decline in semiconductor stocks is a compelling buying opportunity.
Key Bank analyst Steve Berger reiterated an “overweight” rating for KLA stock with a target price of $410, reflecting a 56% upside compared to the current price, citing the company’s strong position in chip equipment markets.
“While we expect cyclical concerns about the chip sector to continue to concentrate the poor in the near term, we think the long-term trend of accelerating data growth and demands around higher performance chips will continue,” he wrote. This is a statement that of course includes the entire chip market.
Logic chips that process data often act as the “brain” of the computer or electronic device, while memory chips are used to store data. KLAC has many clients, including the 2 largest chip manufacturing companies in the world, Taiwan Semiconductor and Samsung.
Earlier this month, the United States announced new restrictions on the export of chips and semiconductor equipment to China in order to protect the security interests of the United States. Those restrictions established a ban on the export of certain types of chips, which can help China in the military and technological aspects – the announcement hurt the shares of the chips, and scared investors out of fear of further restrictions on the part of the administration on this issue
Chip equipment companies are expected to be adversely affected by the new restrictions. Last week, KLA’s competitor, Applied Materials
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It warned of a miss on its previous revenue forecast for the coming quarter, and blamed the US government’s new export restrictions on China. So we understand that these restrictions are materially damaging and come down to the numbers in the reports.
Key Bank is not alone in its optimistic assessments for KLA. Similarly, JP Morgan analyst Harlan Sohr said KLA is one of his favorite stocks from the chip equipment sector, adding that the company’s ability to generate strong earnings over time remains intact.
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