Keysight Technologies stock rating upgraded to Neutral by BofA Securities

BofA Securities upgraded Keysight Technologies (KEYS) to Neutral from Underperform, raising its price target to $175, citing that post-5G investment peak revenue declines have largely run their course and orders have bottomed. The firm noted strong fundamentals and anticipates modest upward earnings revisions from pending acquisitions, including the $1.5 billion Spirent deal which recently received DOJ clearance. While significant 6G orders are not expected until late 2027, the upgrade reflects a more stable outlook as the company navigates the transition.

Analysis

Bank of America has upgraded Keysight Technologies (KEYS) to Neutral from Underperform and raised its price target to $175, signaling a belief that the cyclical downturn following the 5G investment peak has concluded. The rationale is anchored on the view that revenue declines have largely run their course, orders have bottomed, and downward consensus earnings revisions are complete. This stabilization is supported by the company's strong financial health, evidenced by a current ratio of 3.39 and moderate debt levels. Near-term growth is expected to be driven by strategic M&A, including the pending acquisitions of software from Synopsys and Ansys, and the $1.5 billion purchase of Spirent Communications. The Spirent deal has notably received U.S. DOJ clearance, de-risking its path to an expected close in fiscal Q3 2025 and paving the way for modest upward earnings revisions. However, the next major secular growth driver, 6G, remains a distant catalyst. BofA projects significant 6G-related orders will not commence until the second half of 2027, justifying the Neutral stance despite the improved outlook. Recent developments, such as a new EMI receiver that triples test speeds and a collaboration with NIO, further underscore Keysight's ongoing innovation and market expansion efforts.

Key Decisions for Investors

• Given the analyst view that the post-5G downturn has bottomed, investors could consider the current stabilization a potential entry or accumulation point, as the primary justification for an underperform rating has been removed.
• Focus should be placed on the execution and integration of the pending Spirent, Synopsys, and Ansys acquisitions as the main near-term catalysts for potential earnings accretion.
• It is crucial to maintain a patient outlook, as the next major growth cycle from 6G is not expected to materially impact order flow for at least two years, aligning with the Neutral rating despite the improved fundamentals.