Why KLA-Tencor Corporation Shares Could Fly Another 15%

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of KLA-Tencor Corporation gained slightly in premarket trading Wednesday after Piper Jaffray assumed coverage on the semiconductor equipment company with a buy rating.

So what: Along with the bullish call, analyst Ruben Roy boosted his price target to $85 (from $70), representing about 15% worth of upside to yesterday's close. So while contrarian traders might be turned off by KLA's price strength in recent months, Roy's call could reflect a sense on Wall Street that its growth prospects still aren't fully baked into the valuation.

Now what: According to Piper, KLA's risk/reward trade-off remains rather attractive at this point. "KLAC's industry leading process control solutions are becoming increasingly relevant to the semiconductor industry as manufacturing complexities are reaching a number of inflection points," said Roy. "In conjunction with its Analyst Event, KLAC increased its dividend and announced an additional share repurchase authorization. We believe that consensus estimates are conservative and expect multiple expansion as KLAC's longer-term earnings power is achieved." With KLA shares now up about 35% from their 52-week highs and trading at a 20-plus P/E, however, I'd hold out for a wider margin of safety before betting too heavily on that bullishness. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

The article Why KLA-Tencor Corporation Shares Could Fly Another 15% originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story