Stocks’ Details

Keysight Technologies Inc.

Regulatory Certification for 5G Test Solutions: Keysight Technologies Inc. (NYSE: KEYS) is a leading technology company, involved in the manufacturing of electronics test and measurement equipment and software. As on 8 January 2021, the company’s market capitalization stood at ~$27.31 billion. On 7 January 2021, the company announced that its 5G network emulation solutions have been selected by Auden Techno Corp. for regulatory certification of Antenna Modules. KEYS’ 5G network emulation solutions help in improving the level of confidence in products and these solutions have been used by Auden to verify that a device operates within limits established by certification bodies for specific absorption rate. In order to ensure that the devices comply with specifications mandated by certification bodies including the Federal Communications Commission, Auden has selected KEYS’ 5G test solutions for regulatory certification.

Q4FY20 Result Highlights: For the quarter ended 31 October 2020, the company had reported total revenue of $1.22 billion, up 9% on pcp. Further, the company reported a GAAP net income of $217 million, up from $195 million in pcp. Q4FY20 orders stood at $1.2 billion, up 3% on pcp. For the full year FY20, the company’s total revenue stood at $4.22 billion, down by 2% on the previous year.

Order Trend (Source: Company Reports)

Outlook: For Q1FY21, the company expects its total revenue to be in the range of $1.14 billion to $1.16 billion. Further, the Non-GAAP earnings per share for Q1FY21 are expected to be in the range of $1.32 to $1.38, subject to any unforeseen event.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months 

Stock Recommendation: Over the last three months, the stock has provided a return of 38.85%. The stock recently touched its 52-week high price of $147.02. On the technical analysis front, the stock has a support level of ~$123.91 and resistance of ~$147. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of high-single-digit (in % terms). Considering the stock’s decent returns in the last three months, high debt-to-equity multiple, current trading level, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $146.8, up by 4.11%, as on 8 January 2021.

Datto Holding Corp.

Expands Global Sales Leadership: Datto Holding Corp. (NYSE: MSP) is a leading provider of cloud-based software and technology solutions to businesses across the globe. As on 8 January 2021, the company’s market capitalization stood at ~$4.26 billion. On 10 December 2020, the company participated in a fireside chat and hosted one-on-one investor meetings at the Barclays Global Technology, Media, and Telecommunications Conference. On 30 November 2020, the company expanded its leadership team by announcing various key sales leadership appointments across Asia Pacific (APAC) and Europe, the Middle East and Africa (EMEA). This will help in accelerating the digital transformation needs of the (Small and Medium Enterprises) SME market in 2021.

Q3FY20 Result Highlights: For Q3FY20, the company reported total subscription revenue of $122.8 million, up 17% on pcp. Further, the company reported Average Run-Rate Revenue (ARR) of $522.8 million, up 17% on pcp, driven by expansion from existing managed service provider partners as they deployed more Datto solutions to more of their end clients, and by the addition of new partners. Over the quarter, the company repaid all outstanding balances under its $550 million term loan facility and its $50 million revolving credit facility.

Q3FY20 Result Highlights (Source: Company Reports)

Outlook: Looking ahead, the company is focused on extending its product leadership and introducing new platform solutions.  The company is committed to invest in new purpose-built product and service offerings to anticipate and meet the evolving demands of its MSP partners and customers.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last one month, the stock has provided a return of 1.60%. The stock is currently inclined towards its 52-week low price of $24.51, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$25.44 and resistance of ~$29.86. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside on low double-digit (in % terms). For the purpose, we have taken peers like VMware Inc (NYSE: VMW), Check Point Software Technologies Ltd (NASDAQ: CHKP), ServiceNow Inc (NYSE: NOW), to name few. Considering the growth in the company’s subscription revenues, repayment of debt, multiple levers for sustained growth, current trading level and valuation, we give a “Buy” recommendation on the stock at the closing price of $26.51, up by 5.62% on 8 January 2021.

Blue Apron Holdings, Inc.

Appointed New CFO: Blue Apron Holdings, Inc. (NYSE: APRN) provides chef-designed recipes to its customers to improve the quality of cooking. In December 2020, the company started its newest campaign, under which, it demonstrates how home cooking can benefit holistic wellness, including physical, brain, relationship, mental and financial health. On 4 January 2021, the company announced the appointment of its new Chief Financial Officer and Treasurer, Randy J. Greben, who holds over two decades of experience in finance, e-commerce operations, and strategic planning.

Q3FY20 Result Highlights:  For the quarter ended 30 September 2020, the company reported net revenue of $112.3 million, up 13% on pcp, driven by the continued positive consumer behavior and execution of the company’s growth strategy. Over the same period, the company’s average revenue per customer increased by 22% to $314, and orders per customer grew by 20% to 5.4. For Q3FY20, the company reported a net loss of $15.3 million. Lately, the company strengthened its balance sheet via an underwritten public equity offering in August 2020 and through refinancing of debt in October 2020.

Key Customer Metrics (Source: Company Reports)

Outlook: For Q4FY20, the company expects its net revenues to be in the range of $108 million to $112 million, reflecting a growth of 15% to 19% on pcp. For the quarter, the company expects to incur a net loss of around $15.0 million and an adjusted EBITDA loss of around $5.0 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last one year, the stock has provided a return of 40.37%, and in the last three months it has provided a return of $5.18%. On the technical analysis front, the stock has a support level of ~$5.59 and resistance of ~$8.93. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation and arrived at a target upside with a correction of low double-digit (in % terms). Considering the company’s decent returns in the last one-year, negative ROE, high debt to equity multiple, valuation, and associated key risk, we suggest investors to book profit and give a “Sell” rating to the stock at the closing price of $7.51, up by 1.21% as on 8 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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