Short Sale Recommendation
KLA-Tencor (NASD) KLAC $32.05
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We are recommending the short-sale of KLA-Tencor over
the near term.
KLA-Tencor is engaged in the manufacture of equipment for
the semiconductor and microelectronic industries. The company's
major products focus on controlling the semiconductor manufacturing
process and/or improving the yield of the manufacturing
While we recognize that KLA-Tencor is a premier equipment
supplier to the semiconductor industry, our concerns regarding
the stock price of KLA-Tencor are as follows:
Our primary concern is the continued poor environment
for the customers of KLA-Tencor; that being the semiconductor
industry. Recently, Intel announced that it will reduce
its capital expenditures to around $4.5 billion down from
The company has done a good job of reducing its expenses
and thus has been able to post profits over the past 18
months. However, it should be noted that over the past six
months gross revenues have declined 22% and net profits
have dropped about 40%. As the slump in the semiconductor
industry continues, it will be more difficult for KLA-Tencor
to show a profit.
At the present time, the investment community is expecting
the company to earn $0.65 per share for the fiscal year
ending June 30, 2003. At its current price of $31.50 per
share, we believe the stock price is very highly valued.
Should the company report earnings of less than $0.65 this
would be a negative surprise and as such would have a depressing
effect on the stock price. Given the overall conditions
in the semiconductor industry we believe that there is a
likelihood of a negative surprise.
We would expect the stock price to decline to the mid-$20s
over the next 2-3 months.
Stock Traders Press Management