National Instruments Looks Like It May Be Building Toward Something More Interesting

 

Opportunity is a tricky thing to evaluate with stocks, as opportunity without execution means nothing more than disappointment. National Instruments (NATI) has the opportunity to benefit from some strong secular trends in wireless and electric vehicles, as well as a shift in value within testing equipment from hardware to software. The company also has a significant opportunity to improve its operating cost efficiency and drive meaningfully better profit and FCF growth.

But will they? I think that’s the real crux of the investment debate on NATI right now. In wireless, millimeter wave (or mmWave) has been slow to catch on, and while NATI has built a differentiated software-based approach to testing, translating high gross margins into strong operating margins has been frustrating.

There’s definitely a bullish case here if you believe that the company’s efforts to reposition its go-to-market strategies will eventually drive operating margins closer to rivals like Keysight (KEYS) or Viavi (VIAV). Should the company come up short, though, the shares are likely to underperform.

 

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National Instruments Looks Like It May Be Building Toward Something More Interesting