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Keysight Gains From High Demand of 5G Design & Test Solutions

Zacks Equity Research

Keysight Technologies, Inc. KEYS is witnessing an impressive run on the bourses with shares up almost 41% on a year-to-date basis. The upside can be attributed to the company’s focus on launching solutions for growth markets like 5G, IoT, next-generation wireless, high-speed datacenters and automotive & energy. Further, we believe its strength in 5G testing and design solutions hold promise.

Recently, Keysight’s 5G test and design solutions were selected by TCL Communication Technology Holdings Limited (“TCL”), a global manufacturer of mobile and internet products.

The companies have collaborated to secure another milestone in 5G New Radio (NR) technology based high-speed data transfer in both non-standalone (NSA) and standalone (SA) mode.

TCL deployed Keysight’s robust 5G NR UXM-based network emulation solutions. The 5G NR solutions enabled TCL to accelerate end-to-end performance validation of 5G multimode devices. This deal bodes well for TCL as the new 5G network emulation solutions enable speeding radio frequency performance testing to tackle new technical challenges and accelerate the deployment of 5G technology worldwide.

The solutions offer cost-efficient test techniques with high flexibility and control capabilities.

Coming to the price performance, shares of Keysight have returned 40.7% year to date outperforming the industry’s rally of 21.8%.

Adoption of 5G NR Solutions Hold Promise

This is not the first time the company’s 5G solutions have been selected by companies. In the recent past, companies like Qorvo, Inc. QRVO, Qualcomm Incorporated QCOM, SoftBank and MediaTek to name few, have deployed Keysight’s 5G test and design solutions.

We believe adoption of the company’s 5G testing and design solutions is anticipated to bolster the top line.

Accelerated commercialization of 5G (likely to commence as early as the first half of 2019) favors the prospects of Keysight’s 5G network emulation solutions. The company has been securing notable customer wins on the back of its strength in robust 5G product portfolio comprising comprehensive set of test and design solutions. The company’s solutions enable telecom companies in accelerating 5G deployment.

Additionally, the acquisitions of Ixia, Anite and AT4 Wireless have enriched the company’s 5G solutions portfolio.

Moreover, the collaborations to develop Open RAN 5G network with companies like AT&T T, Xilinx, to name a few,  is likely to enable Keysight in proliferating the 5G space.

Keysight recently showcased PathWave Design 2020 with robust electronic design automation (EDA) software capabilities. The new release will enable software developers to design workflow for advanced 5G, Radio Frequency (RF) technology and microwaves. The latest release is aimed at bolstering innovation in the electronics testing methods and is expected to enhance Keysight’s solutions, which in turn will favor adoption rate.

Encouraging 5G Trends Boost Prospects

Per ResearchAndMarkets data, global 5G market is expected to reach $251 billion by 2025, at a CAGR of around 97% from 2020. Further, per MarketsandMarkets estimates, communication test and measurement market is projected to attain a valuation of $6.69-billion by 2020 at a CAGR of 9.3% from approximately $4.28 billion in 2015.

Intensive infrastructure investments in 5G push and positive trial testing results are tailwinds in this regard. Smart connected homes, hospitals, factories and cities along with self-driving vehicles remain key beneficiaries of 5G.

Backed by these aforementioned factors, we believe Keysight is well-poised to capitalize on the ongoing upbeat trends in the 5G market and sharpen its competitive edge.

However, leveraged balance sheet and integration risks remain major concerns. Further, Keysight derives a significant proportion of its revenues from outside the United States rendering it susceptible to exchange rate volatility owing to sluggishness in China and trade-war concerns.

Zacks Rank

Currently, Keysight carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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