Company Reports

We maintain our $157 fair value estimate for shares of wide-moat Keysight Technologies as we believe our long-term thesis is intact after the firm reported fiscal second-quarter results. Keysight continues to see weaker demand across its served markets, led by commercial communications. We expect soft results through the fiscal year and a multiyear rebound across fiscal 2025 and 2026. Fiscal second-quarter results were slightly above our expectations, while fiscal third-quarter guidance was modestly below our model. Overall, our view on Keysight’s longer-term opportunity is unchanged. We continue to see the firm as well-positioned with a comprehensive communications testing portfolio and good adjacent opportunities in cars and semiconductors. We see shares as fairly valued.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We trim our fair value estimate for shares of wide-moat Keysight Technologies to $157 per share, from $166, to reflect a softer short-term environment than we’d previously modeled. Keysight’s results came in above the top end of management guidance, but fiscal second-quarter guidance just missed our model, and management’s outlook for the fiscal second half was below our forecast. Keysight continues to face softer customer spending, particularly in its wireless communications and industrial markets. We still like the firm’s relatively stronger demand in aerospace, defense, and government customers, and it’s seeing some upside in data center spending from artificial intelligence, or AI. We continue to expect stronger long-term results from Keysight and appreciate its moaty, comprehensive portfolio for communications testing. Shares slid commensurate to our fair value trim after the results were reported, and we see the stock as fairly valued.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We modestly trim our fair value estimate for shares of wide-moat Keysight Technologies to $166, from $170, to reflect lowered expectations for fiscal 2024. We reiterate our confidence in Keysight for the long term, and its ability to rebound from current soft end-market demand. In the fiscal fourth quarter, Keysight saw a continuation of the weak spending environment for telecom customers that has hamstrung orders across fiscal 2023. The firm is now encountering additional weakness out of its consumer and semiconductor end markets, particularly in China, which leads us to taper our short-term forecasts. We now expect a low-single-digit sales decline in fiscal 2024, driven entirely by weaker end markets.

We trim our fair value estimate for wide-moat Keysight Technologies to $170 per share, from $175, after fiscal fourth-quarter guidance missed our expectations. The communications market, which is the firm’s largest, and the semiconductor market are exhibiting slower order patterns and customers are pushing out purchases by multiple quarters. These negative dynamics are more than offsetting relative strength in government and automotive markets. Keysight’s good results in fiscal 2023 have been helped in part by working through excess orders left in its backlog, which is now back to normal levels. Management cautions for a few quarters of weakness, and we now expect lower growth in fiscal 2024 behind lower demand. Still, we believe shares are undervalued. An 8% drop in after-hours trading looks like an overreaction to us, and we think savvy long-term investors have a lot to like about Keysight’s competitive positioning, growth profile, and profitability.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We maintain our $175 fair value estimate for wide-moat Keysight Technologies shares after fiscal second-quarter results bore no large surprises. Communications sales continue to stagnate amid a soft spending environment at commercial customers and weak consumer demand. Government and automotive markets remain bright spots that are helping to offset commercial communications weakness. Fiscal second-quarter profitability meaningfully beat our expectations from positive mix that we think will be short-lived. Still, we see a path to these strong margins longer-term, and make no changes to our positive growth expectations for Keysight and its comprehensive portfolio for communications testing. Shares have approached our fair value, popping 8% upon the release, which we believe is due to alleviation of fear that demand might weaken further. We see shares as fairly valued now.

We maintain our $175 fair value estimate for wide-moat Keysight Technologies after the company's 2023 investor day. Keysight’s executive team largely emphasized continuity of the firm’s existing strategy, which we see as having generated shareholder value and carved a wide economic moat. The firm provided updated financial targets for fiscal 2026, which were above the prior targets from its 2020 investor day but largely in line with our existing forecast. While we see the long-term prospects as bright for Keysight, the current fiscal year should remain a tough environment, as management mentioned during the first-quarter earnings call two weeks ago. We see the shares as close to fairly valued.

We are lowering our fair value estimate for wide-moat Keysight Technologies to $175 from $180, after it opened its fiscal year with a respectable quarter but provided disappointing guidance for the year based on a weakening demand environment. The outlook fell well short of our previous expectations on both a revenue and adjusted earnings basis along a book/bill ratio of 0.94. While we are disappointed with the outlook for the year, our long-term thesis remains intact as we see Keysight continuing its dominance in testing equipment for critical communications infrastructure and additional growth of its software portfolio to achieve more recurring revenue. Despite an 8% drop in the stock during after-hours trading, we view shares as fairly valued.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We maintain our $180 fair value estimate for wide-moat Keysight Technologies after a strong fiscal fourth quarter and positive fiscal first quarter guidance. Keysight enjoyed robust growth for each of its segments and end markets in fiscal 2022, and we see order trends remaining healthy through fiscal 2023. We also credit management for margin stability through inflation, and we think margins can improve from fiscal 2022 levels as supply eases for Keysight’s components. While the short-term macroenvironment remains uncertain, we have confidence in Keysight’s execution resulting from its sticky position in research and development labs and dominance of testing equipment for critical communications infrastructure where we don’t see spending slowing down. Shares look fairly valued to us.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G and high-speed networking markets. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G market. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G market. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We are raising our fair value estimate for wide-moat Keysight Technologies to $180, from $174, after it reported strong fiscal third-quarter results and again raised its fiscal year guidance. We’re impressed with Keysight’s ability to offset macroeconomic headwinds, and believe it can continue executing through fiscal 2023 as supply begins to loosen. While we do see signs of demand decelerating from supernormal levels, we don’t expect it to decrease in the short term, and expect it to continue outpacing supply. We view Keysight’s solution-based portfolio with a growing mix of software as highly sticky with customers, which helps lead to both a durable backlog and our wide economic moat rating. Shares rose with the strong results and we view them as fairly valued.

We’re maintaining our $174 fair value estimate for wide-moat Keysight Technologies after it reported fiscal second-quarter results, and continue to view shares as undervalued. Keysight beat its top- and bottom-line guidance in the quarter and raised its full-fiscal-year guide, but we think supply constraints and foreign exchange headwinds will weigh on results in the short term. We view demand as healthy, but Keysight saw slowing order growth in the quarter and a decrease in its book/bill ratio from prior quarters. We think the market had a mixed view of the strong results and macroeconomic headwinds, with shares flat after-hours. We still think shares look cheap for Keysight. We don’t think its current share price fully bakes in the long-term demand we expect for its comprehensive communications testing portfolio through wireless cycles, nor the profitability upside from its growing mix of software.

We think Keysight Technologies is the leader in communications testing and measurement solutions, and offers a vendor-agnostic way to invest in the rapidly growing 5G market. In our view, Keysight has the strongest and broadest communications testing capabilities in the market, inclusive of hardware, software, and services. We think a comprehensive portfolio allows Keysight to act as a strategic partner to its customers, enabling new designs and accelerating time to market for network operators, network equipment OEMs, device OEMs, and suppliers.

We’re maintaining our $174 fair value estimate for Keysight Technologies after the company reported fiscal first-quarter results in line with our above-consensus expectations. The market was relatively neutral to results, but we now view shares as ever-so-slightly undervalued after coming down from their December peak. We think Keysight is enjoying broad-based success across its portfolio and end markets. We think its comprehensive communications portfolio of hardware and software—which contributes to our wide economic moat rating—allows it to lead with 5G customers and benefit from ongoing adoption of next-generation networks. We also see early success of the firm’s growing automotive endeavors, which helped drive upside to management’s guidance in the fiscal first quarter.