MKSI · MKS
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $170.00
Note written ·
Price against the kill line
26.9% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $170.00, on record since 10 November 2026. The shares are down 32.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $170.00, which would put the shares well under the 6 November 2026 close of $192.27 despite record results and a buyback. Fourth-quarter revenue under the $1.450 billion low end of company guidance would also break the case.
Research onlyNot in the portfolio.
The business · as of
MKS sells instruments, lasers and process-chemistry equipment to chipmakers, electronics and packaging makers and industrial customers, and earns money from product sales and service. Revenue was $1,413 million in the quarter to 30 September 2026.
What is changing, and what follows · as of
- What is changing now
- On 4 November 2026 MKS reported third-quarter revenue of $1.413 billion, up 43.0% from a year earlier, and guided fourth-quarter revenue to $1.490 billion plus or minus $40 million.
- What follows for the company
- Operating margin reached 23.1% in the quarter to 30 September 2026, from 13.8% in the quarter to 31 March 2026. Debt is $3,777 million against $511 million of cash and short-term investments; the board approved a $500 million buyback on 4 November 2026.
- What follows for its customers, suppliers and competitors
- Chip-equipment peers Applied Materials (AMAT) and Lam Research (LRCX) rose sharply in the week of 9 November 2026. TTM Technologies (TTMI) agreed to buy the Ophir Optics unit for $650 million in cash.
What the price assumes · as of
At the 13 November 2026 close (filed inputs to 5 November 2026): enterprise value $17,848 million; EV/sales 3.7; EV/EBIT 20.5; P/E 24.2. That holds only if revenue keeps growing near the 43.0% of the latest quarter and the operating margin stays near its 23.1%.
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 1,413
- Revenue, change on a year (%)
- +43.0
- Gross margin (%)
- 47.7
- Operating margin (%)
- 23.1
- Free cash flow, four quarters ($M)
- 552
- Net cash, cash less debt ($M)
- −3,266
- Price to earnings (×)
- 24.2
- Enterprise value to sales (×)
- 3.7
All filed numbers
What MKS reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 1,413 | +43.0 | 47.7 | 23.1 |
| first filed | 1,248 | +28.3 | 47.7 | 20.1 |
| first filed | 1,078 | +15.2 | 47.0 | 13.8 |
| first filed | 1,033 | +10.6 | 46.4 | 13.8 |
| first filed | 988 | +10.3 | 46.7 | 14.0 |
| first filed | 973 | +9.7 | 46.6 | 13.9 |
| Pre-tax income ($M) | 287 |
| Net income ($M) four quarters: 602 | 236 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +7.2 |
| Operating cash flow ($M) | 730 |
| Capital spending ($M) | 178 |
| Free cash flow ($M) | 552 |
| Cash and short-term investments ($M) | 511 |
| Debt ($M) long-term debt plus short-term borrowings | 3,777 |
| Net cash, cash less debt ($M) | −3,266 |
| Deferred revenue ($M) +72.5% on a year | 138 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 902 |
| Inventory ($M) | 1,162 |
| Shareholders' equity ($M) | 3,286 |
| Market value ($M) | 14,582 |
| Enterprise value, market value plus net debt ($M) | 17,848 |
| Enterprise value to sales (×) | 3.7 |
| Enterprise value to operating income (×) | 20.5 |
| Price to earnings (×) | 24.2 |
| Price to book value (×) | 4.4 |
| Free-cash-flow yield (%) | 3.8 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.3% of shares outstanding sold short, 3.7 days of average trading to cover, −3.5% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $75K |
| 12 monthsfrom | $0 | $43.4M |
The thesis
MKS Inc. sells instruments, lasers and process-chemistry equipment to chipmakers and electronics-packaging makers. The call is that record results and a fourth-quarter guide above analyst estimates make the shares modestly more likely than not to beat the S&P 500 over the next three months. Fourth-quarter revenue against the $1.490 billion guide, plus or minus $40 million, settles it; the report is expected around February 2027.
Revenue was $1,413 million in the quarter to 30 September 2026, up 43.0% from a year earlier, after growth of 28.3% in the quarter to 30 June 2026 and 15.2% in the quarter to 31 March 2026 (10-Q filed 5 November 2026). The 4 November 2026 report cleared the company's own August guidance of $1.350 billion plus or minus $40 million. Benzinga put consensus for the fourth quarter at $1.398 billion revenue and $3.93 earnings per share, against company guidance of $1.490 billion and $5.00 plus or minus $0.38.
The shares closed at $215.65 on 13 November 2026. That is 51.8% below the 52-week intraday high of $447.62 (30 June 2026) and below both the 50-day average of $236.72 and the 200-day average of $277.07 (adjusted daily closes). The three-month change is −32.7%, a fall that came while reported revenue growth accelerated.
Bullish and bearish views on MKS Inc.
The bull case on MKS Inc. (MKSI), in brief: record quarter above the guidance range. The bear case: the shares are still falling after the rebound.
Bull case
- Record quarter above the guidance range. Revenue of $1.413 billion beat the $1.350 billion midpoint of August guidance, and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $434 million, per the 4 November 2026 release. Semiconductor revenue was $638 million, up 54% from a year earlier, and Electronics & Packaging was $415 million, up 43%.
- Margins have widened sharply. Operating margin was 23.1% in the quarter to 30 September 2026, against 13.8% in the quarter to 31 March 2026 and 14.0% in the quarter to 30 September 2025. Net income was $236 million in the latest quarter and $602 million over four quarters.
- Cash generation is real. Free cash flow was $552 million over the four quarters to 30 September 2026, a 3.8% yield on the 13 November 2026 market value of $14,582 million.
- Capacity is sold out into 2027. On the 5 November 2026 call, management said chemistry equipment capacity is sold out through 2027 with bookings extending into 2028. Deferred revenue was $138 million at 30 September 2026, up 72.5% from a year earlier.
- A buyback exists and leverage is inside target. The board approved a $500 million repurchase program on 4 November 2026. Management put net leverage at 2.4 times at 30 September 2026, inside its 2.5 times target, and made a $100 million term-loan prepayment in November.
- High targets remain. Citigroup kept Buy with a $350 target on 6 November 2026, and Needham kept Buy with a $300 target on 5 November 2026.
Bear case
- The shares are still falling after the rebound. They closed at $226.00 on 11 November 2026, $221.50 on 12 November 2026 and $215.65 on 13 November 2026, below both the 50-day and 200-day averages.
- Targets were cut after the report. Citigroup, Wells Fargo and Needham all lowered targets within two days of the results. Wells Fargo kept Equal-Weight and set its target at $195, below the latest close.
- Margins face pressure into 2027. Third-quarter gross margin was 47.7%, which included a 30-basis-point benefit from tariff refunds that management does not expect to repeat. Management said mix and capacity spending will weigh on gross margin into 2027.
- A large guide leaves less room for a miss. The $1.490 billion midpoint is 5.5% above third-quarter revenue. CEO John Lee said on 5 November 2026 that the supply chain is relatively under control but that one unexpected component shortfall remains a risk.
- Debt and dilution. Debt was $3,777 million against $511 million of cash and short-term investments at 30 September 2026, and the diluted share count rose 7.2% from a year earlier.
- Insiders sold into the summer highs. SEC Form 4 filings show the CEO sold 10,000 shares at $302.01 on 14 August 2026 and a director sold 300 shares at $250.96 on 1 September 2026, both under Rule 10b5-1 plans. The CEO's 30 October 2026 filing was an option exercise with 2,157 shares withheld for tax at $202.04.
Price setup
The shares closed at $192.27 on 6 November 2026, $211.59 on 9 November 2026, $213.47 on 10 November 2026, $226.00 on 11 November 2026, $221.50 on 12 November 2026 and $215.65 on 13 November 2026. The 52-week closing low is $138.49 (20 November 2025) and the 52-week intraday high is $447.62 (30 June 2026).
The 50-day average of $236.72 is the nearest overhead level, and the 200-day average of $277.07 sits further above (both as of the 13 November 2026 close). The three-month change of −32.7% is measured from the 17 August 2026 close.
At the 13 November 2026 close the shares trade at 24.2 times earnings and 3.7 times sales on an enterprise value of $17,848 million (filed inputs to 5 November 2026). Wells Fargo's $195 target is below the close, while Citigroup's $350 and Needham's $300 are well above it; all three were set after the third-quarter report.
Across US stocks trading at least $5 million a day, the spread of 63-session returns had a standard deviation of 27% in 2026, so any single stock's three-month outcome sits in a wide range. MKSI's path runs from a 52-week closing low of $138.49 to a high of $447.62, with the latest close 51.8% below that high.
Catalysts ahead
- ~February 2027 (est.): MKS fourth-quarter 2026 report (date not yet announced). Settles whether revenue reaches the $1.450–1.530 billion guidance range and gives the first 2027 outlook.
- ~June 2027 (est.): Targeted close of the $650 million Ophir Optics sale to TTM Technologies (second quarter of 2027). Brings in cash that management says adds balance sheet flexibility; closing needs regulatory approvals.
What would change the view
A daily close below $170.00, which would put the shares well under the 6 November 2026 close of $192.27 despite record results and a buyback. Fourth-quarter revenue under the $1.450 billion low end of company guidance would also break the case.
The risks this note tracks, each with what would confirm it:
- Chip-equipment valuations compress again even though results beat, so the shares lag the index. Confirmed by: further analyst target cuts after the record quarter and the buyback, or peer reports that send sector shares lower; the shares fell from $226.00 on 11 November 2026 to $215.65 on 13 November 2026.
- Fourth-quarter revenue falls short of the $1.490 billion guide because of supply-chain gaps or customer timing. Confirmed by: MKS reports fourth-quarter revenue below $1.450 billion, or management cites a component shortfall on the next call.
- Gross margin stays under pressure from product mix and capacity spending, as management said it expects into 2027. Confirmed by: reported non-GAAP gross margin below the 46.5% low end of the fourth-quarter guide of 47.5% plus or minus 1.0%.
- Debt of $3,777 million competes with the $500 million buyback for cash, and a rising share count dilutes per-share earnings. Confirmed by: net leverage rising back above the 2.5 times target, term-loan prepayments pausing while repurchases proceed, or the diluted share count growing faster than the 7.2% of the latest quarter.
What it trades with
MKS trades with chip-equipment makers such as Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC), because its instruments and chemistry tools are bought alongside theirs. A 247WallSt report said Applied Materials rose 11% and Lam Research 9% in afternoon trading on 9 November 2026 ahead of Applied's earnings, the same session MKSI closed at $211.59, up from $192.27 on 6 November 2026. The same report noted Lam had dropped after its 21 October 2026 report, when management said supply constraints would limit revenue.
Management said on 5 November 2026 that it expects wafer-fab equipment spending to grow in the mid-30% range in 2026 and approach $300 billion by 2028. Electronics and packaging demand adds a second link, to printed-circuit-board and advanced-packaging investment.
The evidence, claim by claim (8)
- Revenue was $1,413 million in the quarter to 30 September 2026, up 43.0% from a year earlier; the previous quarter grew 28.3% and the quarter to 31 March 2026 grew 15.2%. MKS 10-Q filed 5 November 2026 (SEC XBRL) · as of
- Operating margin was 23.1% and gross margin 47.7% in the quarter to 30 September 2026; operating margin was 13.8% in the quarter to 31 March 2026. MKS 10-Q filed 5 November 2026 (SEC XBRL) · as of
- Free cash flow was $552 million over the four quarters to 30 September 2026 (operating cash flow $730 million less capital spending $178 million); net income was $236 million in the latest quarter. MKS 10-Q filed 5 November 2026 (SEC XBRL) · as of
- Debt was $3,777 million against cash and short-term investments of $511 million at 30 September 2026; deferred revenue was $138 million, up 72.5% from a year earlier. MKS 10-Q filed 5 November 2026 (SEC XBRL) · as of
- The diluted share count rose 7.2% from a year earlier in the quarter to 30 September 2026. MKS 10-Q filed 5 November 2026 (SEC XBRL) · as of
- MKS guided fourth-quarter revenue to $1.490 billion plus or minus $40 million, adjusted EBITDA to $461 million plus or minus $29 million and non-GAAP EPS to $5.00 plus or minus $0.38. MKS 8-K Exhibit 99.1 · as of
- Citigroup kept Buy and cut its target to $350; Wells Fargo kept Equal-Weight and cut its target to $195; Needham kept Buy and cut its target to $300. Benzinga analyst-action reports · as of
- The CEO sold 10,000 shares at $302.01 on 14 August 2026 and a director sold 300 shares at $250.96 on 1 September 2026, both under Rule 10b5-1 plans. SEC Form 4 filings · as of
Sources
- MKS Inc. Reports Third Quarter 2026 Financial Results · globenewswire.com ·
- SEC EDGAR
- MKS (MKSI) Q3 2026 Earnings Call Transcript · fool.com ·
- Applied Materials Jumps 11% Ahead of Earnings; Lam Research Surges 9%, ASML Rises 6% · 247wallst.com ·
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