Kulicke & Soffa (KLIC - Get Rating) was trading at $23 in September. Today, the stock is trading at $45 and change. The stock of this semiconductor packaging and solutions business keeps on climbing despite the ongoing economic recession. It is clear the demand for computer chips is quite high, while supply remains limited.

Though KLIC does not receive the same level of attention as Intel (INTC) and Nvidia (NVDA), it deserves the investing community’s attention. If you do not currently own a semiconductor stock or if your holdings do not include KLIC, it is time to consider adding this lesser-known semiconductor to your portfolio.

Without further ado, let’s examine whether KLIC can continue to climb or if the stock is likely to stagnate or possibly even decline following its meteoric rise.

KLIC’s Business

KLIC is considered a semiconductor stock, yet the company does not make computer chips. Rather, KLIC provides the electronic assembly solutions and packaging necessary to create such computer chips. The company’s solutions are used to develop the computer chips needed for automobiles, communications, industrial machines, computers, and other consumer electronic devices.

Though KLIC is not spearheading new advances in computer chip processing power, its packaging and assembling solutions are certainly in demand. Furthermore, KLIC also makes money from maintaining, repairing, and upgrading semiconductor equipment.

KLIC Merits

Most semiconductor stocks have forward P/E ratios over 30, sometimes as high as 50 or even 100+. However, KLIC is the exception, with a surprisingly low forward P/E ratio of 14.12. The stock’s current price of $45 and change is merely $7 below its 52-week high of $52.55. Even if KLIC were to move back toward its yearly high, it would still have a modest forward P/E ratio, indicating its valuation is sensible.

KLIC’s latest earnings were solid in all regards. These earnings surpassed analysts’ expectations by a considerable margin. KLIC revenue is up 50.8% year over year. The company’s adjusted earnings per share are up nearly 200% for the quarter. These impressive figures are the result of KLIC becoming the top player in the production of the specific equipment necessary for advanced semiconductor packaging. It must also be noted that KLIC has net cash of $576 million, an eye-popping figure that accounts for nearly one-quarter of the company’s aggregate market capitalization

KLIC According to the Analysts

KLIC is held in high regard by Wall Street analysts. Analysts established an average price target of $59.50 for KLIC. If the stock were to elevate to this level, it would rise by an impressive 21.16%. The analysts’ high target for the stock is $69. Furthermore, the stock’s lowest price target is $49. Of the four analysts who have issued recommendations for KLIC, three consider it a Buy, and one considers it a Hold.

KLIC POWR Ratings

KLIC has a POWR Ratings grade of B, indicating it is a Buy. The stock has B grades in the Momentum, Quality, and Value components of the POWR Ratings. If you are curious about how KLIC grades out in the Sentiment, Stability, and Growth components, you can find out by clicking here.

Of the 99 publicly traded companies in the Semiconductor & Wireless Chip industry, KLIC is ranked 11th. Click here to find other top stocks in that industry.

Will the Rally Continue?

There is a good chance KLIC’s rally will continue. The demand for semiconductor chips is through the roof, meaning KLIC will benefit continue. 

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KLIC shares were trading at $45.15 per share on Wednesday afternoon, up $0.19 (+0.42%). Year-to-date, KLIC has gained 41.94%, versus a 4.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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