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Why is KLA Corp. (KLAC) Stock down?

26 Jan, 2024:

KLA Corp. (KLAC) stock declined by 6.60% due to disappointing second-quarter results and a less-than-favorable outlook. Here's what happened:

  • Earnings and Guidance Disappointment: Both revenue and EPS guidance for the upcoming quarter fell short of Wall Street's expectations, contributing to the stock's decline. Additionally, the company's free cash flow missed expectations.
  • Uncertainties in the WFE Business: During the earnings call, company management emphasized uncertainties in the resumption of growth in the Wafer Fab Equipment (WFE) business. They noted signs of improvement in some end markets but acknowledged that this improvement is coming from a low base, impacting customer profitability and cash flow in the near term.
  • Outlook and Expectations: KLAC expects the weakness in its financial performance to bottom out in the March quarter, with hopes of a return to sequential growth starting in the June quarter and continuing through the rest of the year. Consequently, the company anticipates WFE demand to remain in the mid to high $8 billion range in 2024, roughly flat compared to the previous year. Overall, the quarter was challenging, reflecting near-term revenue headwinds similar to what other semiconductor companies have reported during this earnings season.
  • Weak Third-Quarter Outlook: KLAC's weak outlook for the third quarter included revenue estimates in the range of $2.175 billion to $2.425 billion, falling below the consensus estimate of $2.46 billion. Adjusted earnings for the period are expected to range between $4.66 and $5.86 per diluted share, which is lower than analysts' expectations of $5.86 per share. This outlook left investors disappointed, contributing to the decline in KLAC's stock price.
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