Part 1

TE Connectivity (TEL)

Company background

TE Connectivity is an American Swiss-domiciled technology company that designs and manufactures connectors and sensors for several industries, such as automotive, industrial equipment, data communication systems, aerospace, defense, medical, oil and gas, consumer electronics and energy.

TE Connectivity has a global workforce of 80,000 employees, including more than 7,500 engineers. The company serves customers in approximately 140 countries.

The company’s mission is to CREATE A SAFER, SUSTAINABLE, PRODUCTIVE AND CONNECTED FUTURE

Being the go-to engineering partner for today’s innovation leaders and technology entrepreneurs, TE Connectivity is helping solve tomorrow’s toughest challenges with advanced connectivity and sensors solutions. These Solutions power electric vehicles, aircraft, digital factories, and smart homes. The company’s innovation enables life-saving medical care, sustainable communities, efficient utility networks, and the global communications infrastructure.

Current position – Financial Performance and Future Growth Prospects

One of the fastest growing business segments of the company throughout the last couple years has been the “Communication Solutions” segment. TE Connectivity’s Communication Solutions products see wide application in the fast-growing data center industry, which is a serious tailwind for the company as data centers will only continue to become more important in the future with the development of the digital age and the new Digital Economy. One of the strong positives for TE Connectivity is that it has a well-balanced and diversified portfolio of products that encompasses broad range of industries and in turn diversifies the company’s revenue streams. For example, with 56.2% of the total 2020 revenues, the largest business segment for TE is by fat the Transportation Solutions one. It focuses on meeting and capturing the demand for automotive, commercial transportation and sensors end markets.

However, the company is doing also very well in the industrial equipment, energy, and aerospace, defense, oil and gas markets, through its Industrial Solutions segment, which as of 2020 accounted for 30.5% of total fiscal revenues. TE Connectivity supplies electronic components, including connectors, relays, circuit protection devices, antennas and heat shrink tubing for industrial machinery, consumer devices, data communications and household appliance markets. Further, it also offers intelligent building and rail products.

Throughout the last 3-5 years TE Connectivity has focused exclusively on expanding its global footprint through series of strategic acquisitions. Now, the company has a much better and more cost-efficient manufacturing strategy in place, which is also contributing to a significant improvement in the company’s margins. Last but not least, the strong push towards renewable energy usage and the increasingly popular hybrid and electric vehicles, combined with the recovery of auto production post COVID-19 are major positives.

Technical Analysis

TEL has been in a clear long-term uptrend ever since it bottomed at around $52 per share in the COVID-19 stock market crash in March, 2020. As a technology company with a great long-term growth trajectory TE Connectivity’s stock has been extremely attractive for both institutional and retail investors. The stock has managed to appreciate from the $52 lows all the way up to the $140 level breaking new all-time highs almost every week. This represented an astonishing 169% stock price increase in a little over a year. The long term bullish momentum behind the stock is quite strong and it will most likely continue to push the price higher in the future. However, the key technical level to watch at the moment is the $140 horizontal all-time high resistance as a potential upward break there could easily open up the door for a move up to $160 and $175 respectively. We can see clearly from the Daily chart of the stock that it has been in the process of accumulating more bullish interest, as it has been consolidating between the $130-140 levels for over 4 months now. The stock is still trading above its 5, 20, 50 and 200 EMAs with the RSI and Stochastics oscillators also moving higher. This shows that path of least resistance remains to the upside and that any dips towards any of the strong dynamic and/or static support levels, should be used as a buying opportunity. We will stay bullish on the stock and will be interested in buying any dips for as long as the stock stays above the $120-$122 support zone. A potential break there could easily send the stock down towards the $100-$105 support area, thus we would be exiting our positions if the $120 support breaks.

Netflix (NFLX)

Company Background

Netflix, Inc. is an American over-the-top content platform and production company headquartered in Los Gatos, California. Netflix was founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California. The company’s primary business is a subscription-based streaming service offering online streaming from a library of films and television series, including those produced in-house.

Netflix Inc. is the world’s leader in the streaming entertainment business as it has over 208 million paid subscribers in more than 190 countries around the world, enjoying documentaries, TV series and feature films across a huge variety of genres and languages. The company has got more than 20 years of experience in the that sector it operates in.

Current Position – Financial Performance & Future Growth Prospects

In the past 5-6 years especially Netflix has done an incredible job in increasing the quality of the content it provides by investing heavily in the expansion of its own production capabilities and developing high-quality original content and expanding in many new countries around the world, which has given the company a chance to further boost its subscription revenues and profits. In fact, Netflix’ s revenue has more than tripled since 2015 while the net profit has gone up tenfold. In other words, the company has done an incredible job in growing its customer base globally and that has been a key factor in its overall market and financial performance, which has in turn been boosting the share price and making more money for its shareholders.

Being the king of the streaming space, Netflix enjoys a very loyal customer base as customers are interested in consuming the best content out there and will remain loyal to the production house that delivers. This helps the company quite a lot from a financial standpoint, as users are willing to stay subscribed even if Netflix raises its prices. For example, back in 2014 the Prime subscription cost was $8, whereas today it is $16. Now, ask yourself how many companies have managed to raise prices with 100% in the last 6 years.. Netflix has not only done that successfully but it has also continued to grow by attracting new subscribers every month. The company has a highly diversified content portfolio, which is a result of the continuous investment in perfecting the production capabilities of the company. Earlier in the year the company announced that it plans to release at least one new original film every week throughout the entire 2021.

One original film a week.. that’s insane! That’s 52 new original movies in 1 year! Just think about it Universal Pictures, which is own of the oldest, most successful and famous production studios out there has a total of 337 movies made and the company has been around for 109 years!

Netflix has upgraded its streaming platform quite substantially in the last few years, making it way more user-friendly and introducing features like Downloads For You, Play Something (shuffle function) etc. From a strategic standpoint, the company launched low-priced mobile plans, which are most likely going to expand Netflix’s subscriber base in the APAC region. Two of the main concerns for investors recently have been the rising competition from the likes of HBO Max, Disney +, Peacock, Amazon, Apple etc. and the relatively higher Debt-to-Equity and Debt-to-Capital levels that Netflix has, when compared to some of its peers in the industry.

However, we believe that Netflix will remain the leader in the streaming entertainment space for the years to come, as the company continues to produce the best original content out there. With 15 Oscar Awards and 86 nominations in the last just few years, it is clear that the company knows what it is doing and that it is headed in the right direction.

Technical Analysis

NFLX has been in a clear long-term uptrend ever since it bottomed at around $290 per share in the COVID-19 stock market crash in March, 2020. However, the stock ended up being stuck in the $465-$570 sideways range for a whole year now. As a streaming and production entertainment company with a great long-term growth trajectory NFLX’s stock has been extremely attractive for both institutional and retail investors. The stock had managed to appreciate from the $290 lows all the way up to the $593 level breaking its new all-time highs on few occasions. This represented a solid 104% stock price increase in just 4 months – from March up until July, 2020. Since then though, the stock has largely under-performed both the S&P 500 as well as most of its competitors. The main reason for that was associated with the pull forward effect that COVID-19 had for its business and the extremely high consensus estimates by the analysts. Investors were also worried that once the pandemic goes away, Netflix will lose a lot of the new clients that it got throughout the pandemic, which will affect the company negatively. This is why you can clearly see on the weekly chart how each and every time the stock reached the $550-70 range sellers came in and pushed the price down towards the $470-$480 support of the range.

However, the long term bullish trend behind the stock is quite strong and it will most likely continue to push the price higher in the future. However, the key technical level to watch at the moment is the $575 horizontal all-time high resistance as a potential upward break there could easily open up the door for a move up to $675 and $750 respectively. We can see clearly from the Daily chart of the stock that it has been in the process of accumulating a lot of bullish interest recently, as it rebounded strongly from the June lows of $485. The stock is currently trading above its 5, 20, 50 and 200 EMAs with the RSI and Stochastics oscillators also moving higher on the daily chart. This shows that if the stock breaks above the $555-$575 range it can start a totally new bullish cycle, which will end up taking the price much higher in the future. The long term path of least resistance remains to the upside and any dips towards any of the strong dynamic and/or static support levels, should be used as a buying opportunity. We will stay bullish on the stock and will be interested in buying any dips for as long as the stock stays above the $460 psychological and horizontal support zone. A potential break there could easily send the stock down towards the next major support at $350-$400, thus we would be exiting our positions if the $460 support breaks.

Sincerely,

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