KLA Corp (KLAC 3.78%) stock soared 9.2% through 1:15 p.m. ET Thursday after one of its biggest customers for semiconductor manufacturing equipment, Taiwan Semiconductor Manufacturing Company (TSM 4.96%), reported strong Q4 2025 earnings.
TSMC earned $2.98 per share on sales of $32.7 billion, blowing away estimates. AMD forecast "strong demand for our leading-edge process technologies" in Q1 2026, which should bode well for KLA's sales as well.
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WFC upgrades KLA
Analyst Joseph Quatrochi from Wells Fargo upgraded KLA stock to overweight this morning -- with a $1,600 price target.
Quatrochi believes demand for new 2-nanometer chips will grow in 2026. TSMC is just getting started on these, but as 2nm becomes the new standard, it makes sense KLA's orders would pick up. In the meantime, demand for 5nm and 3nm chips used in high-performance computing, which together make up 63% of TSMC's shipments, will drive sales.
Aside from TSMC, the analyst expects KLA to expand its business with other semiconductor companies, with Intel "increasing process control intensity at Intel" as a particular driver of new business.
NASDAQ: KLAC
Key Data Points
Is KLA stock a buy?
Quatrochi forecasts KLA will report $12.7 billion in 2025 revenue, growing to $14.1 billion in 2026 and $15.7 billion in 2027 (so an 11% sales growth rate). He forecasts $35.36 per share in 2025 earnings, $38.87 in 2026, and $45.17 in 2027 (13% growth).
And yet... at a share price of nearly $1,570, KLA stock already costs 45 times trailing earnings. Even assuming KLA hits growth targets, paying 45x earnings for 13% growth seems a stretch. It works out to a PEG ratio of more than 3.
