Trading Idea: Keysight Technologies (KEYS-US)

We had an Enter Long Strategic signal on October 22, 2021, triggered by our system on Keysight Technologies, KEYS-US, the US Capital Goods company.

Our system also triggered an Enter Long Tactical signal on October 19, 2021 that imply a likely bullish acceleration. Keysight has a strong track record, with a Behavioral score of 10/10, therefore the signal looks mainly Strategic.

Keysight is a $ 34.4 Bn market cap company that provides electronic measurement instruments, design and test software and systems related services. The Company’s operating segments include Communications Solutions Group (CSG) and Electronics Industrial Solutions Group (EISG). CSG segment serves customers spanning the worldwide, including commercial communications and aerospace, defense, and government end markets. CSGs solutions consist of electronic design and test software, electronic measurement instruments, systems and related services. EISG provides test and measurement solutions and related services across a set of electronic industrial end markets, focusing on applications in the automotive and energy industries and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design.

Keysight recently announced a partnership with Lockheed Martin to advance 5G in support of mission-critical communications for aerospace and defense applications.

KEYS is originally a spinoff from Agilent. The company went public in 2014 after a series of divestitures. It is a notable positive that KEYS's senior management team came from Agilent.Keysight Technologies is a high quality company that benefits from some of the biggest themes in investing, including 5G, electric & autonomous vehicles, and China (20% of Group’s revenue exposure).

For the 5G, KEYS's systems are used for testing devices, chipsets, networks and telecom equipment across the entire 5G ecosystem. Furthermore, KEYS systems are used for multiple use cases such as mobile devices, broadband internet and industrial applications. Broad usage of KEYS systems means the company is well positioned to benefit from many years after the initial 5G rollout.

Test and measurement instruments are used in R&D, prototyping, design and development of electronic products as well as during the production process to validate product functionality. Once the equipment is deployed, test and measurement instruments are used to monitor performance.

For 2021, Keysight expects revenue of $4.9 Bn coupled with a 27% EBIT margin. Double digit growth is expected on EPS in the 2 following years driven by organic growth and margin expansion.

Short term catalyst : 5G applications.

This signal looks consistent with the US Capital Goods sector in major bullish trend. There is a strong participation, with 71% of US capital goods in tactical signal and 65% in strategic signal.