Oppenheimer Upgrading KLA Tencor (KLAC)

Oppenheimer & Co. is upgrading shares of KLA-Tencor Corporation KLAC to Perform with a $46 price target on shares. In a note sent to clients, Oppenheimer writes, "Against the backdrop of the foundry industry normalizing to 40% or greater capex intensity levels to compete at the sub-45nm nodes, we are upgrading KLAC to Perform with a $46 price target, and unwinding our sell thesis based on share loss. As total semiconductor capex rotates away from DRAM, we argue that KLAC benefits with 1) higher inspection spend per capex dollar in NAND, 2) higher/more defensible share, particularly in foundry, and 3) better profitability profile driven by upward momentum in its mask/reticle inspection business for foundry, and more technical-driven sales for foundry vs. DRAM (where there is some element of price competition)." Oppenheimer goes on to say, " Checks suggest that big, chunky orders corresponding to GlobalFoundries' capex budget of $5.4B has entered the company's forecast, and that this has the potential to drive KLAC's bookings levels back to $800M by mid-year, FQ4 (Jun). On a Y/Y basis, KLAC faces a tough comp, in the form of $956M in bookings last Jun, but the near term trajectory back to $800M indicates that $800M-plus in quarterly shipments/revenue is sustainable for longer then we had previously modeled." Shares of KLAC gained 43 cents yesterday to close at $38.99, a gain of 1.1%.