Part 4

Keysight Technologies Inc. (KEYS)

Company Background

Keysight Technologies, is an American company that manufactures electronics test and measurement equipment and software. The company works with manufacturers, service providers, and enterprises worldwide providing solutions to help accelerate innovation, connect and secure the world and is also a leader in the industry that it operates in. One of the key distinctive characteristics that makes the company uniquely positioned to generate consistent double-digit annual growth in the coming years is the fact that Keysight Technologies provides a highly-specialized, professional service and products across a wide range of industries and works with the leaders in these respective industries. Keysight’s portfolio of products and solutions is truly impressive as it spans across very attractive and high-growth markets like: 5G, Cloud storage, Internet of Things, Data Center Infrastructure, Design and Automation, Connected Car, Energy Ecosystem, High-Speed Digital System Design, Network Security, RF + Microwave, SDN + NFV +Virtualization, Network Test, Network Visibility, Manufacturing Test, Measurement Fundamentals. This has established Keysight Technologies as a trusted and reliable partner for companies and governments around the world. Technological innovation has been one of the most important aspects of our evolution as a society and civilization in recent years and its importance will only continue to grow in the years to come. From the company standpoint the versatility that Keysight provides to key industries like Aerospace & Defense, Automotive & Energy, Communications, Education, Enterprise, Government, Semiconductor, Service Providers ensures stable ,well-balanced and strongly diversified revenue streams for the foreseeable future.

Current Position – Financial Performance and Future Growth Prospects

With an impressive clientele including Alphabet, Amazon, Boeing, Facebook, MediaTek, Microsoft, Nvidia, Samsung, TSMC, and Tesla, to mention just a few the company is indirectly operating on all fronts of technological innovation. Moreover, the company has a strong pipeline of new business bookings for 2020 and beyond, which further shows that Keysight’s products and services are highly sought after. Quite often, we at DowExperts receive questions about which stock is the best Technological, 5G, VR, AR, Internet, AI stock out there and here with Keysight Technologies you have a perfectly balanced access to all of these high-growth markets at an attractive valuation.

What’s more important is that Keysight is operating behind the curtains of innovation as a contractor, rather than a first line innovation builder. Why is that important for you as an investor? Well, because in most instances every new technological era is associated with high fixed starting costs, risk of full-scale adoption etc. which usually makes it rather difficult for those engaged in this initial infrastructure building process. However, Keysight helps these new technologies to be pushed forward by testing different processes, solutions and concepts in the lab following its clients’ needs and then provides them with the ready-to-use solution that the clients were looking for. The important thing to note here is that, Keysight’s revenues and earnings don’t depend on the actual success of the implementation of these new innovative solutions that their clients needed or on the costs and risks associated with that implementation.

In other words, Keysight is sitting in a very favorable position from a risk-reward perspective when it comes to these new technologies and their future development. Let’s look at an example in order to help you visualize this in a better way.

Alphabet could be working on a new piece of a ground-breaking technology that is expected to change the business world entirely in the coming years. Alphabet then decides to higher Keysight Technologies to test and further perfect the functionality of this technology and Keysight receives a hefty compensation for its services. It then provides Alphabet with whatever it is that the company needed and from that point on it is up to Alphabet to find the right applications and build the right infrastructure around this new piece of technology, so that it could have the positive impact that Alphabet initially anticipated. As you can understand, there are many different risks and unknowns that Alphabet would be undertaking in this example, whereas Keysight Technologies would have already received its compensation for its services and would have already shifted its focus on the next project. We at DowExperts believe that this creates a very powerful secular growth trend for the company and puts it in the perfect position to benefit from the increased competition in all of these high-growth industries for the years to come.

We all know that when the mass adoption of a new technology is just around the corner, companies go crazy about solidifying their competitive and possible leading position in the respective industry. As a result of that, we usually see a significant increase in their R&D budgets, which leads to higher revenues and earnings for companies like Keysight Technologies.

We at DowExperts believe that Keysight’s robust 5G portfolio is expected to be a solid growth driver going forward. The company’s 5G product design validation solutions ranging from Layer 1 to 7 enable telecom and semiconductor companies to accelerate their 5G initiatives. Further, Keysight’s 5G network emulation solutions facilitate end-to-end processes from development to deployment, accelerating the 5G device architecture. The solutions offer cost-efficient test methods with high adaptability and control functionality, which in turn reduces time-to-market. Keysight Technologies has seen a CAGR of more than 60% in order growth in 5G domain throughout the last 3 years. Intensive infrastructure investments in 5G deployment and positive trial testing results hold promise. In fact, per ResearchAndMarkets data, global 5G market is expected to reach $277 billion by 2025, witnessing a CAGR of around 111% between 2019 and 2025.

Furthermore, ongoing technical advancement in mobile communications, semiconductors and automotive markets are likely to drive long-term growth. A rising demand for power management applications is considered to also be a key catalyst for the company. Continuous efforts towards the ongoing modification of the Internet infrastructure, evolution of smart cars & autonomous-driving vehicles are other positive growth drivers. Lastly, the medical devices and pharmaceutical markets hold immense potential for a substantial increase in demand for electronics testing of specialized equipment.

Technical Analysis

  • Last recommended the stock @103 => it went up to $153 in 4 months = 48.5% return

By looking at the daily chart, we can see the strong bullish rally that has occurred in the last 12 months has taken the price from the March 23rd lows of 2020 around $78 to the $155 all-time highs in the middle of February, 2021. This represented an astonishing 98.7% gain for the stock in less than a year. However, the road to the current all-time highs was filled with many different hurdles as the bulls had to overcome quite a lot of obstacles in order to keep pushing the price higher. There have been few 10% corrective movements that took place during this strong uptrend, including the current 15% decline that the stock has experienced, but the uptrend however has remained intact on all occasions. The stock has continued to attract a lot of investors’ attention as it remains one of the most well positioned companies to benefit from the biggest trends of the future – 5G, IoT and AI. The fact that Keysight Technologies has continued to sign multi-year contracts with some of the biggest innovators in the tech space has built massive confidence in the company and has made it a go-to choice for both small retail and large institutional investors looking to add some 5G, IoT and AI tech exposure to their portfolios.

We will start buying KEYS at $135, just above the major support where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be interested in adding more to our buy positions at the next strong support at $130. Our first take profit target is at $160, followed by the next target at $170 where we will be fully closing our positions and collecting the profits.

The stock is currently sitting at $136 per share, which is 15% below its all-time highs of $155 per share. It seems that the stock has finally found some meaningful support around the 130 level, after the massive decline that the stock has staged in the last 2-3 weeks. The most recent failure of the price to break below the $130 mark could be taken as a signal for a fading bearish momentum signaling for a potential bullish reversal ahead and a general resumption of the long-term uptrend. A more meaningful correction for the stock was generally anticipated by us as we clearly pointed out the heavily overextended nature of the uptrend in our last analysis of the stock back in December, 2020. However, the correction took a little bit longer to materialize as we were initially expecting for the stock to experience short-term difficulties throughout January, while it kept on rallying higher as the trade was way too overcrowded on the long side. At any rate, the bears finally caught up with the stock and combined with the solid profit taking interest by the bulls managed to push the prices lower.

Moving forward, we believe that the new $1.9 trillion stimulus package accepted in the US, will inject a lot of liquidity into the market, which will be a great short-term positive for the equity market. We expect most of the big tech names as well as other retail trading favorites to restore their favorable image among traders and investors in the coming weeks, thus we anticipate that the XLC and the XLK will be two of the best performing sectors in March. While we believe that the stock market in the US is currently holding a lot of intrinsic risks – COVID-19, the newly formed office in DC, the economic recovery, the post-Brexit economic reality for the UK and EU etc. – and that we could be in for a sideways and choppy price action in the coming months. However, we see that the winners would most likely continue to win. We are bullish on KEYS in both the short and long term and believe that the most recent price corrections should be treated as a great opportunity to buy this strong performing stock at a remarkable discount, which would in turn give us a chance to maximize our profits to the upside.

Moreover, some of the technical indicators that we are monitoring closely on a daily basis (50 DMA, 100 DMA, Bollinger Bands, RSI etc.) have already retraced from their overbought conditions and are signaling that the uptrend might be returning pretty soon. In addition to that, it is important to note the fact that the XLK and the Technology sector as a whole would continue to attract a lot of the investors’ attention moving forward, as technology is everything nowadays and the companies in this space are the ones shaping up our future. This makes us optimistic for the future performance of KEYS as a meaningful part of the ETFs structure. Our analysis shows that as a result of the great fundamental positioning of Keysight Technologies, the stock will be able to hold its ground better than some of the other stocks out there in the event of an even deeper correction, and it would also significantly outperform the broader market once the uptrend resumes.

Acknowledging the fact that we are in a position to buy at an over 15% discount from the all-time high levels, we would like to point out that buying at these levels would be suitable for both risk-oriented investors as well as risk-averse traders. Thus, we are advising all of our followers to look at the 130-135 range for a potential long entry on the stock

Netflix (NFLX)

Company Background

Netflix Inc. is the world’s leader in the streaming entertainment business with its 204 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.

In the past 5 years especially Netflix has done an incredible job in increasing the quality of the content it provides to its paid subscribers 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.

Current position – Financial Performance and Future Growth Prospects

Netflix’s financial performance has been very strong in the past few years. Looking at this year’s results, we shall say that the Company started off the year on the best possible note, adding almost 16 million new paid subscribers globally in the first quarter of 2020. In fact, that was the highest number of new subscribers the company has ever gained in a single quarter.

Q2, Q3 and Q4 for the fiscal 2020 were also very solid and the company reported some strong revenue and net profit figures, even though it technically missed analysts’ expectations in all three quarters. Usually, if a company misses the expected numbers in three consecutive earnings reports, investors tend to flee away from the stock as this might be a sign for serious internal problems for the company. This could not be further from the truth, as the only reason why Netflix has been missing the earnings estimates is because the estimates have become way to high and almost impossible to reach due to the company’s exceptional performance in recent years. One could say that Netflix has become a victim of its own success, as analysts have started to demand this ridiculous company growth to continue and we all know that when a certain business grows, matures and becomes more established it is unrealistic to think that it will continue to grow at the same rate as when it was still a young company trying to stand out.

There are a few companies out there that have actually benefited greatly from the current pandemic. Due to the imposed social distancing and quarantine around the world, people have been staying mostly at home. Thus, they have been having more time for watching TV series and movies and therefore that has led to a huge increase in the company’s new paid subscribers for the quarter.

At the end of Q4, Netflix had 203.66 million paid subscribers globally, up 21.9% from the year-ago quarter, beating management’s expectation of 201.15 million paid subscribers.

The strong growth reflects Netflix’s solid content portfolio amid growing competition from services launched by Apple, Disney, ViacomCBS, AT&T, Discovery and Comcast.

Notably, the company now expects paid net additions to be 6 million compared with the year-ago quarter’s 15.7 million for the first quarter of 2021, reflecting stiff competition.

Due to the 2nd wave of coronavirus and the fact that many countries have remained in either full lock-down or with very strict measures on people’s mobility and activity throughout the last few months, we are expecting Netflix to keep increasing its paid subscribers base and that by itself to continue boosting its revenues and profits in the future.

Technical Analysis

Due to the Company’s great financial performance in the past few years, together with the strong boost it got during the COVID-19 pandemic, Netflix stock has been in a very strong uptrend since September 2019 when it was trading at the $252 lows. Since then, we have seen a massive uptrend on the daily chart, sending the price towards the $575 for the first time in the middle of July last year.

In fact, the price has been trading in a range between $575 and the $465 lows in the past 7 months. In other words, traders tend to wait for a pullback on the stock down towards the key support marks at $485 and $465 respectively in order to initiate their BUY positions. The heavy buying interest around these levels, has resulted in the price failing to break that major support to the downside for quite some time now and has ended up pushing the stock up towards the $550 level almost every time.

We will start buying NFLX at $515, just above the major support where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be interested in adding more to our buy positions at the next strong support at $495. Our first take profit target is at $590, followed by the next target at $635 where we will be fully closing our positions and collecting the profits.

The stock is currently sitting at $523 per share, which is 12% below its all-time highs of $594 per share. It seems that the stock has again managed to find some meaningful support around the $485 level, after the massive decline that the stock ended up staging in the last 4-6 weeks. The most recent failure of the price to break below the $485 mark could be taken as a signal for a fading bearish momentum signaling for a potential bullish reversal ahead and a general resumption of the long-term uptrend. A more meaningful correction for the stock was generally anticipated by us as we clearly pointed out the heavily overextended nature of the uptrend in our last analysis of the stock back in January, 2021. Once again, we were spot on with the timing as the correction started at the end of January. At any rate, now after the bears have officially done their job pushing the price down towards these key support levels it seems that the stock is getting ready to reap higher again.

Moving forward, we believe that the new $1.9 trillion stimulus package accepted in the US, will inject a lot of liquidity into the market, which will be a great short-term positive for the equity market. We expect most of the big tech names as well as other retail trading favorites to restore their favorable image among traders and investors in the coming weeks, thus we anticipate that the XLC and the XLK will be two of the best performing sectors in March. While we believe that the stock market in the US is currently holding a lot of intrinsic risks – COVID-19, the newly formed office in DC, the economic recovery, the post-Brexit economic reality for the UK and EU etc. – and that we could be in for a sideways and choppy price action in the coming months. However, we see that the winners would most likely continue to win. We are bullish on NFLX in both the short and long term and believe that the most recent price corrections should be treated as a great opportunity to buy this strong performing stock at a remarkable discount, which would in turn give us a chance to maximize our profits to the upside.

Moreover, some of the technical indicators that we are monitoring closely on a daily basis (50 DMA, 100 DMA, Bollinger Bands, RSI etc.) have already retraced from their overbought conditions and are signaling that the uptrend might be returning pretty soon. In addition to that, it is important to note the fact that the XLC and the Communications sector as a whole would continue to attract a lot of the investors’ attention moving forward, as Communication is everything nowadays and the companies in this space are the ones shaping up our future. This makes us optimistic for the future performance of NFLX as a meaningful part of the ETFs structure. Our analysis shows that as a result of the remarkable brand loyalty and impeccable brand image, even if a certain correction occurs, NFLX will be able to hold its ground better than some of the other stocks out there.

Acknowledging the fact that we are in a position to buy at around 15% discount from the all-time high levels, we would like to point out that buying at these levels would be suitable for both risk-oriented investors as well as risk-averse traders. Thus, we are advising all of our followers to look at the 490-505 range for a potential long entry on the stock

Sincerely,

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