Goldman Sachs downgrades this stock as the auto market faces a difficult macroeconomic outlook and names Tesla a top pick
Keysight Technologies shares are poised for a rebalancing as both the automotive and communications infrastructure industries face a difficult macro environment, according to Goldman Sachs. Analyst Mark Delaney downgraded shares of the electronic design and test solutions company, which supplies products for industries such as autos, to neutral from buy. He noted the company’s growing exposure to a declining communications infrastructure market and its best-in-class valuation relative to its peers. “We expect investment in telecom/communications infrastructure to slow given the weakening macro backdrop, which we believe could negatively impact Keysight’s business,” Delaney wrote in a statement Tuesday. On a valuation and price-to-earnings basis, the stock trades at a 35% to 40% premium to its peers, even with limited upside opportunities, he said. The company’s revised price target to $189 from $196 suggests shares can gain 6% from the close on Tuesday, while other Buy-rated stocks in the company’s reporting offer an average of 22% upside, Delaney noted. Despite these ongoing headwinds, Delaney is bullish on the stock over the long term and views the company’s products and revenue from recurring software, among other things, as tools that can help Keysight maintain a healthy financial position even as capital expenditures decline. “Importantly, we view Keysight as a leader in the test market and one of the best-performing companies in our coverage (given its strong margins and market share) and we would be more bullish on the stock if we see any signs of orders again.” accelerate and/or if we see a better lineup on fundamentals versus Street’s estimates,” he wrote. Delaney lowered his price target on Rivian shares to $19 from $41 per share in the same note , despite confidence in the company’s long-term fundamentals.”We are lowering our revenue estimates due to lower shipping assumptions to better reflect the progress of the business ramp-up and supply chain, while our EPS estimates are rising due to fewer loss-making unit sales in 2023 and lower operating expenses he wrote. Delaney also named Genera l Motors and Tesla as his favorites in 2023, noting that both companies are leaders in autonomy. “We prefer TSLA and GM (where Tesla is a cost and technology leader in EV/clean mobility, and both Tesla and GM Cruise are among the leaders in autonomy, in our opinion),” the analyst said. – CNBC’s Michael Bloom contributed to the coverage
https://www.cnbc.com/2023/01/11/goldman-sachs-downgrades-this-stock-as-auto-market-faces-a-tough-macro-outlook-names-tesla-a-top-pick.html Goldman Sachs downgrades this stock as the auto market faces a difficult macroeconomic outlook and names Tesla a top pick
