CIBC Ups KLA-Tencor to Outperform

Analyst Ali Trani sees strong demand and favorable product mix for the chip-equipment maker

CIBC World upgrades chip-equipment maker KLA-Tencor (KLAC ) to outperform from sector perform.

Analyst Ali Irani says the first-quarter upside and flat sequential second-quarter guidance confirm to him that the chip-equipment maker can buck a current downdraft in tooling as it benefits from a robust backlog, stronger-than-average demand for its process diagnostic and control (PDC) equipment and a favorable product mix shifts into 90nm chips.

Irani notes, with little competition in PDC, and thus superior pricing power, KLA-Tencor is benefiting from challenging fabrication migrations to 90nm chips and a rising number of 65nm pilot lines that require earlier demand for its newest tool-sets.

Trani sees $2.26 fiscal 2005 (Jun) earnings per share, and ups his $54 price target to $66.