Keysight Technologies(US:KEYS) Seeking Alphaยท2024-06-09 04:28Investment Thesis - The company is expected to generate close to $12 per share by 2030, representing a potential return of 12% if purchased at the current price [4]. Financial Performance - For Q2 2024, the company reported revenue of $1.22 billion, exceeding expectations by 1% [8]. - EBITDA for Q2 2024 was $332 million, also beating estimates by 1.4% [8]. - Earnings per share (EPS) for Q2 2024 was $1.41, surpassing expectations by 1.6% [8]. - Revenue for Q1 2024 was $1.259 billion, reflecting an 8.8% decline compared to FY2023 [8]. - Q2 2024 revenue decreased by 12.5% compared to the same quarter in FY2023 [13]. - The company anticipates Q3 2024 revenue to be between $1.180 billion and $1.200 billion, with EPS expected to range from $1.30 to $1.36 [8]. Market Context - The company is experiencing a general industry downturn, with similar companies also facing revenue declines, attributed to high-interest rates affecting client capital expenditures [8][13]. - The semiconductor industry outlook is projected to improve by 2025, with decreasing inventories and increasing demand in specific areas [9]. Valuation Metrics - The company is currently trading at a P/E ratio of 34 based on 2024 earnings, which is considered high due to expected margin compression and lower income [9]. - The P/E ratio is projected to decrease to 23 by 2025 as profit margins recover [9]. - Free Cash Flow (FCF) is expected to decline more than revenue this year, but future growth in FCF per share is estimated at 12% annually [10]. Conclusion - Despite current challenges, the company is not losing market share, and the economic slowdown is viewed as temporary, making the current valuation more attractive for potential investment [18].