Keysight Technologies, Inc. KEYS recently announced that its test solutions have been adopted by Taiwan-based test laboratory — Audix — for the verification of safe levels of radio frequency (RF) and microwave emissions from wireless devices.
Audix will leverage Keysight’s solutions to ensure that new 5G-based devices that operate in either mmWave or sub-6GHz frequency bands, meet the electromagnetic radiation safety standards set by the Federal Communications Commission (FCC) in the United States and the radio equipment directive (RED) for CE marking in Europe.
Notably, Keysight’s portfolio of 5G test solutions enable test labs like Audix to verify the performance of devices transmitting RF and mmWave electromagnetic fields and ensure their compliance with established safety standards.
The Audix deal win highlights strength of Keysight’s test solutions and is expected to boost the company’s top line in the upcoming quarters. Moreover, strong performance of the company’s solutions is likely to bolster investor confidence in its stock.
Coming to price performance, shares of Keysight have returned 5.4% on a year-to-date basis, outperforming the industry’s rally of 3.4%.
Keysight Technologies Inc. Price and Consensus
Keysight Technologies Inc. price-consensus-chart | Keysight Technologies Inc. Quote
Solid Traction for 5G Solutions Bodes Well
Keysight’s 5G test and measurement solutions have been witnessing robust demand in recent times.
Recently, Keysight’s solutions were selected by telecom giant, China Unicom, to ensure that 5G smartphones and consumer premises equipment (CPE) are compliant with the latest 5G new radio (NR) standards. The solutions will aid in accelerating Unicom’s rollout of enhanced wireless services across various industries.
In March, the company’s offerings were adopted by chipmaker NVIDIA NVDA to accelerate the development of high-value mobile services and flexible virtualized networks. Markedly, NVIDIA will leverage Keysight’s solutions to test its Aerial software development kit (SDK) that allows telecom companies to roll out software-defined 5G virtual radio access networks.
Besides, incremental adoption of the company’s latest LoadCore offering, a 5G core network testing solution that simulates complicated real-world subscriber models, bodes well.
The strong momentum for Keysight’s 5G test solutions holds promise for the company’s growth prospects over the long haul. This can be attributed to higher infrastructure investments in the deployment of 5G mobile networks. Per Allied Market Research data, the global 5G technology market is anticipated to record a CAGR of 122.3% between 2020 and 2026.
Additionally, the surge in stay-at-home trends thanks to COVID-19 induced lockdowns is driving demand for high-speed connectivity. As a result, Keysight’s 5G test solutions are likely to witness improved rate of adoption in the days ahead.
COVID-19 Pandemic Remains a Headwind
Supply chain disruptions and market uncertainties stemming from the ongoing pandemic is dampening the company’s performance. In second-quarter fiscal 2020, Keysight’s commercial communications (CC) revenues declined 5% year over year to $468 million.
Moreover, due to the temporary shutdown of its production facilities, the company might not be able to fulfill the demand for its offerings that will likely impede revenue growth in the upcoming quarters.
Nevertheless, the company is improving production and services operations and anticipates returning to 100% capacity by the end of the fiscal third quarter amid persistent supply chain challenges. Additionally, robust 5G order growth primarily fueled by 5G investments, augur well.
Zacks Rank & Key Picks
Keysight currently carries a Zacks Rank #4 (Sell).
A few better-ranked stocks worth considering in the broader sector are Bandwidth Inc. BAND, and Nice Ltd. NICE. Both stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Bandwidth and Nice is currently pegged at 13.6% and 10%, respectively.
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