Oppenheimer upgraded KLA (NASDAQ:KLAC) to Outperform following the company's fiscal first-quarter results and guidance that topped/missed estimates.

The firm also raised the price target on the stock to $850 from $750.

Analysts led by Edward Yang said they upgraded the stock on better than expected fiscal first quarter 2025 results and guidance, and have raised FY25-FY26 (June) estimates by 2%. They noted that that last month, they recognized KLA's fundamental strength as the "Microsoft of metrology and inspection," but held back on valuation and China risk.

Although uncertainty persists, now is the opportune time, on the following grounds — favorable six to nine month window opening as government intervention activity closes for this year, allowing investors to refocus on strong AI theme; improved valuation below-market multiple; and dominant franchise, oligopoly participation, and share owner-oriented management intact, supporting double-digits growth, 40% GAAP operating margin and 30% free cash flow, or FCF, conversion.

Meanwhile, Evercore reiterated its Outperform rating on KLA and lowered the price target on the stock to $850 from $900.

Analysts Vedvati Shrotre and his team noted that KLA raised 2024 WFE (Wafer Fab Equipment) Outlook to about $97B, versus $95B previously, and expect 2025 WFE to grow, driven by technology transitions in leading-edge logic (Gate-all-around, or GAA + backside power) and DRAM (High Bandwidth Memory, or HBM+ DDR5 transitions).

China outlook: KLA's management noted a 13% quarter-over quarter decline in China revenue for December quarter, lowering China revenue exposure to about 35% and expect China exposure to decline to nearly 30% in 2025, implying a nearly 17% decline year over year.

Heading into 2025, KLA's management expects the strength in leading-edge investments across foundry logic and memory markets to offset the China decline, the analysts added.

The analysts expect KLA's 2025 revenue to grow 12% year-over-year benefiting from — leading-edge front-end equipment, including for GAA. The company noted an acceleration in demand on leading-edge with strong design activity driving 2nm roll-outs and 3nm spending; and continued demand for advanced packaging for datacenter-chips supporting AI workloads.

Shrotre and his team said that KLA noted continued uptick in fab utilization, consistent with Evercore's cycle view that the industry is emerging from an inventory correction.

Related tech stocks: ASML (ASML), Lam Research (LRCX), Applied Materials (AMAT), Teradyne (TER) and Entegris (ENTG) were largely flat premarket on Thursday.