KEYS - Keysight Technologies: Weak Demand Threatens Shares' Full Valuation

2024-03-23 21:32:31 ET

Summary

• Keysight Technologies' stock has underperformed the technology sector due to weak orders from wireless carriers and softness in China.
• The company is experiencing declines in revenue across all units and challenges in both China and Europe.
• Despite higher gross margins, profit margins are being pressured by increased R&D spending and rising SG&A costs.
• With shares 25x 2024 earnings and a sharp recovery unlikely, shares have downside and should be sold.

Shares of Keysight Technologies ( KEYS ) have been a poor performer over the past year, trading essentially flat and missing out on a significant rally across the technology sector. The company has struggled with weak orders from wireless carriers and softness in China. Having worked down its backlog, it now faces revenue declines. Since recommending investors sell shares in November given the company’s disappointing performance, KEYS stock has rallied by 11%, which has lagged the S&P 500’s 15% return during that time. With the growth picture increasingly cloudy, investors who have stayed in the stock should use the rally to sell, as I expect it to continue to underperform broad indices....

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