“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, July 27, 2020

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO

"Trading Capital Management"



Option Trade – Keysight Technologies Inc (NYSE: KEYS) Calls

Thursday, July 30, 2020

** OPTION TRADE: Buy KEYS NOV 20 2020 100.000 CALLS at approximately $6.40 (Up to $6.80).

Place a pre-determined sell at $12.80.

Also include a protective stop loss of $2.55.

Keysight Technologies Inc (NYSE: KEYS), an electronics test and measurement equipment and software company based out of Santa Rosa, Calif, seems to be on an upward trend.

Keysight Technologies share price has soared 225% in the last half decade.

Keysight Technologies's revenue has been growing nicely, at a compound rate of 8.2% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

Ever since spinning off from Agilent Technologies back in 2014, KeySight Technologies has been making it look easy.

This electronic design & test instrumentation systems company has beaten earnings estimates in 5 straight quarters and, more impressively, in 14 of the past 15 quarters. And the one quarter that didn’t positively surprise was a meet, so there are no misses in all that time.

The company is launching new solutions in some of the hottest and growthiest areas, such as 5G and IoT. It also has collaborations with Qualcomm, Xilinx and AT&T, which further aids in its robust 5G portfolio.

About Keysight Technologies.....

Keysight Technologies provides electronic design and test solutions to commercial communications, networking, aerospace, defense and government, automotive, energy, semiconductor, and electronic industries in the Americas and the Asia Pacific.

Its Communications Solutions Group segment provides radio frequency and microwave test instruments, and electronic design automation software tools; oscilloscopes, logic and serial protocol analyzers, logic-signal sources, arbitrary waveform generators, and bit error rate testers; optical modulation analyzers, component analyzers, power meters, and optical laser source solutions, as well as optical amplifier, filter, and other passive component solutions; and related software solutions.

Past Earnings…..

Keysight Technologies last released its quarterly earnings data on Tuesday, May 26th.

The scientific and technical instruments company reported $0.78 earnings per share for the quarter, missing the consensus estimate of $0.93 by ($0.15). Keysight Technologies had a return on equity of 26.33% and a net margin of 14.01%. The firm had revenue of $892.00 million for the quarter, compared to analyst estimates of $1.03 billion.

During the same quarter in the prior year, the firm earned $1.22 earnings per share. The firm’s revenue for the quarter was down 18.4% on a year-over-year basis.

Future Earnings.....

Keysight Technologies is expected to announce its next quarterly earnings results on Wednesday, August 19th.

Brokerages predict that Keysight Technologies will announce earnings of $0.84 per share for the current quarter. Keysight Technologies posted earnings per share of $1.25 in the same quarter last year, which suggests a negative year over year growth rate of 32.8%.

Also, brokerages forecast that Keysight Technologies will post sales of $918.65 million for the current fiscal quarter. Keysight Technologies reported sales of $1.09 billion during the same quarter last year, which would suggest a negative year-over-year growth rate of 15.7%.

Analysts’ Opinions.....

Several equities analysts have recently commented on the company…..

  • Bank of America cut their price objective on shares of Keysight Technologies from $105.00 to $102.00 and set a “neutral” rating for the company in a report on Monday, May 18th.
  • Credit Suisse Group reaffirmed a “buy” rating and set a $125.00 price target on shares of Keysight Technologies in a report on Tuesday, May 26th.
  • Susquehanna Bancshares reaffirmed a “buy” rating and set a $130.00 price target on shares of Keysight Technologies in a report on Thursday, June 18th.
  • Finally, JPMorgan Chase & Co. raised shares of Keysight Technologies from a “neutral” rating to an “overweight” rating and increased their price objective for the company from $112.00 to $127.00 in a research note on Monday, June 1st.

Two analysts have rated the stock with a hold rating and eight have assigned a buy rating to the stock. The stock currently has a consensus rating of “Buy” and a consensus target price of $118.00.

Summary.....

Keysight Technologies has a current ratio of 3.47, a quick ratio of 2.67 and a debt-to-equity ratio of 0.62. The firm has a market capitalization of $18.37 billion, a price-to-earnings ratio of 32.01, and a price-to-earnings-growth ratio of 3.25 and a beta of 1.09.

Keysight Technologies has a 12 month low of $77.93 and a 12 month high of $110.00. The firm has a 50 day moving average price of $100.28 and a 200 day moving average price of $96.89.


Option Trade – Skyworks Solutions Inc (NASDAQ: SWKS) Calls

Tuesday, July 28, 2020

** OPTION TRADE: Buy SWKS NOV 20 2020 150.000 CALLS at approximately $6.80 (Up to $7.40).

Place a pre-determined sell at $13.60.

Also include a protective stop loss of $2.75.

Semiconductor firm Skyworks Solutions Inc (NASDAQ: SWKS), a smartphone chip supplier, reported third-quarter fiscal 2020 last Thursday; with a revenue of $736.8 million, ahead of the consensus estimate of $691.2 million. That led to adjusted earnings per share of $1.25, topping the $1.14 per share in adjusted profits that Wall Street was expecting. The company also boosted its quarterly dividend by 14% to $0.50 per share.

Shares initially dropped but have recovered and are now pushing upwards.

"At the cusp of a multi-year upgrade cycle, we are capitalizing on early market momentum and accelerating widespread 5G adoption. Our efforts are underpinned by years of investment in next-generation technologies, uniquely positioning Skyworks to deliver long-term profitable growth," CEO Liam Griffin said in a statement.

The Massachusetts-based company was posting wild ups and downs before coronavirus became a factor. Investors worried about the trade war with China, but things were just starting to look up for SWKS stock before the virus took the market on a nosedive.

Skyworks connected chips are found in all kinds of everyday electronics from smartwatches to Facebook’s Oculus virtual reality headsets. As connected technology gets a boost from 5G, Skyworks will benefit.

This mid-cap semiconductor company is a major supplier for Apple’s iPhone line, and has seen its own fortunes decline since the giant admitted that Q2 earnings will not meet expectations in the wake of the coronavirus epidemic. The extent of Skyworks’ dependence on Apple is clear from a single statistic: in fiscal 2019, the chip company made 51% of its total revenue from sales to Apple.

While partly a weakness, this link to Apple also gives Skyworks a clear entry into the 5G chip market. The company’s products will power the new 5G iPhones – and makes Skyworks the supplier for an end-user base over 900 million strong, and loyal to their iPhones. It’s a solid foundation for Skyworks.

Influencing Factors.....

Skyworks’ Sky5 product portfolio facilitated several 5G launches. The company’s offerings were selected by Samsung, Motorola, VIVO, Xiaomi and OPPO as well as other Tier-1 players for 5G mobile platforms.

5G subscriptions, globally, are continuing to grow with estimates set to hit $3 billion over the next five years.

The company is benefiting from accelerating demand for 5G handset. Markedly, in China (23% of Skyworks' revenues), during the month of June, approximately 60% of all smartphones sold were 5G-enabled.

Skyworks has shipped more than 150 million BAW-enabled modules. The company is witnessing strong momentum for this technology in both mobile and broad markets.

Skywork Wi-Fi 6 solutions were adopted by AT&T T to power its tri-band home gateways.

Skyworks is supporting home security solutions at Amazon’s AMZN Ring Security Systems by delivering highly integrated connectivity. Additionally, it is ramping indoor and outdoor access points at Juniper JNPR, Linksys and Aruba.

The company also rolled out mesh router and voice assistant solutions to Google.

In the industrial space, Skyworks is powering IoT platforms at Gemalto and Bosch, while the company’s GPS, circulator and advanced filter solutions witnessed design wins at leading aerospace and defense companies.

The Sky5 platform was adopted by leading automobile manufacturers like Ford and BMW.

Skywork is also diversifying in the infrastructure space based on deals with Ericsson, Nokia and Fujitsu.

Moving Ahead.....

The prominent Apple supplier also issued a strong outlook for the fiscal fourth quarter. Revenue is forecast in the range of $830 million to $850 million, which is expected to translate into adjusted earnings per share of $1.51. That outlook is ahead of the $788.6 million in sales and $1.43 per share in adjusted profits that analysts are currently modeling for.

Apple is Skyworks' biggest customer, accounting for 51% of revenue last fiscal year. The Cupertino tech giant's flagship iPhones are reportedly being delayed until late October due to supply chain holdups related to the COVID-19 pandemic. Skyworks will enjoy robust sales as Apple begins producing new handsets ahead of the launch.

So…..

The stock received a slew of price target upgrades following the report, with most analysts reiterating buy (or equivalent) ratings.