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Will Keysight Remain an Outperformer in 2020 on 5G & IoT?

Radhika Pujara

Keysight KEYS stock has returned 66.9% year to date, outperforming the industry’s rally of 59.6%. In the same time frame, the stock has also fared better than the S&P 500 index’s growth of 29.9%.

The impressive share price performance can primarily be attributed to solid demand for the company’s electronic design and test instrumentation systems.

Further, the company’s focus on launching new solutions aimed at growth end-markets like 5G, IoT, next-generation wireless, high-speed datacenters and automotive & energy is a key catalyst.

Year-to-Date Price Performance

Encouraging Earnings Estimate Revision

Keysight has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters by 19.37%, on average.

Moreover, over the last 30 days, fiscal 2020 estimates were revised, driving the Zacks Consensus Estimate by 5.9%, to $5.19 per share.

Further, the company has a long-term expected earnings growth rate of 9.1%.

Let’s delve deeper and analyze the factors expected to influence this Zacks Rank #1 (Strong Buy) company’s financial performance in 2020. You can see the complete list of today’s Zacks #1 Rank stocks here.

5G to Bolster 2020 Prospects

Keysight is well poised to capitalize on strong growth in the wireless ecosystem primarily triggered by advancement in 5G investment.

Gartner predicts 5G wireless network infrastructure revenues to hit $4.2 billion in 2020, up 89% over projected revenues of $2.2 billion in 2019. Moreover, per Gartner, investments in 5G new radio (NR) network infrastructure is expected comprise 12% of the total wireless infrastructure revenues of CSPs or (communications service providers) in 2020, from anticipated 6% in 2019.

This accelerated deployment of 5G in 2020 positions Keysight well to benefit from 5G NR network collaborations with Qualcomm QCOM, Xilinx XLNX and AT&T T. This, in turn, will also help the company in fortifying presence in the global 5G network emulation market.

In fact, recently Keysight declared that its 5G conformance test solutions will be utilized by Korea Testing Laboratory. It will help Korea Testing Laboratory in achieving 5G NR device certification.

Furthermore, Keysight’s collaborations with the likes of Softbank, OPPO, ASUS, Motorola, Verizon Communications and Qualcomm, are enabling it to achieve 5G commercialization related milestones.

Additionally, tie-ups with fabless semiconductor companies engaged in providing 5G chipsets, like UNISOC, MediaTek, among others, enhances the company’s prospects in the 5G domain.

Moreover, acquisitions of Ixia, Anite and AT4 Wireless have enriched Keysight’s 5G solutions portfolio. Further, a strong pipeline for new business bookings is a positive.

Strength in IoT & Defense Vertical Worth Mentioning

Apart from strength in 5G domain, Keysight’s efforts in other emerging growth markets like IoT and high-speed data centers, bodes well for the top line in 2020.

The company is expected to benefit from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications, and rising adoption of driver-assistance systems globally.

Particularly, focus on Automotive and Energy, and Aerospace and Defense domains bolsters 2020 business prospects. In fact, growth in revenues from Aerospace, Defense and Government (ADG) end-market deserves a special mention. In fourth-quarter fiscal 2019, the non-GAAP revenues from this vertical came in at $263 million, up 5% year over year.

Moreover, higher government spending and investments in China bodes well in this regard. Keysight is expected to benefit from adoption of its ADG solutions driven by rise in investments in defense modernization solutions, including cyber electromagnetic activities.

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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
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