Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Keysight Technologies Tumbled on Monday

By Lou Whiteman – May 20, 2019 at 4:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yet another 5G supplier gets caught up in the Huawei kerfuffle.

What happened

Shares of Keysight Technologies (KEYS 0.04%) fell more than 9% on Monday after the telecom equipment manufacturer became the latest in its sector to get caught up in the ongoing dispute between China's Huawei Technologies and the U.S. government

So what

Makers of equipment that goes into fifth-generation, or 5G, wireless technology have been under pressure since last week following a decision by the federal government to designate Huawei as a company engaged in activities that are contrary to U.S. interests. The designation restricts Huawei from buying equipment or licensing technology from American companies.

A cargo crate with the U.S. flag painted on it crashes into a crate painted in the Chinese flag.

Image source: Getty Images.

Keysight is one of a handful of companies expected to profit from the emergence of 5G wireless technology, and relative to some of its peers it has little exposure to Huawei. But Baird analyst Richard Eastman on Monday downgraded the company to neutral from outperform and lowered his price target to $82 from $90 on the news.

Eastman says that while Huawei is a small direct customer of Keysight, the impact of the dispute could weigh on Keysight's growth potential. He said he does not expect the troubles to hurt results in the recently completed quarter, though Huawei and China are expected to be a key topic of the post-earnings outlook discussion.

Keysight provides network test equipment to telecom operators and other original equipment manufacturers (OEMs), allowing them to improve their time to market when rolling out 5G equipment.

Now what

Keysight shares were having a remarkable year before the Huawei headlines, with the stock up more than 45% year to date in late April. Even after Monday's decline, the stock is still up more than 20% year to date, 7 percentage points ahead of the S&P 500.

Given the promise of 5G and Keysight's important role in the development of the networks, it is tempting to look at Monday's decline as a buying opportunity. But until there is more clarity into how the U.S.-Huawei dispute will play out, and what it will mean for 5G network development, investors should proceed cautiously.


Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Keysight Technologies Stock Quote
Keysight Technologies
$168.71 (0.04%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.