AeroVironment (AVAV; +8% pre-market): The Department of Defense awarded AeroVironment a contract worth $990M for supply of advanced longrange weapons, with delivery expected to be completed in 2029. The stock is expected to gap above its 50- and 100-DMA. Immediate resistance is at
$191.8 (+8%). It is forming a stage-three consolidation base, with the pivot 21% away.
Author: vipin khare
O’Neil Capital Equipment Sector Weekly
Mazagon Dock Shipbuilders (MZK.IN; MAZDOCKS IN) – $10B market cap; $212M ADV: We booked a 90.8% gain and removed Mazagon Dock
Shipbuilders from the Emerging Markets Focus List as the stock pulled back 23% from its all-time high, breaching support along its 50-DMA on above
average volume. Indian defense stocks have been declining after the government kept its defense budget allocation unchanged in the Union Budget in
July. The lack of substantial new shipbuilding orders in the latest quarter could have further dampened investor sentiment. Next support is at its 100-
DMA (-20%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Axon Enterprise (AXON) – $28B market cap; $216M ADV: We added Axon Enterprise to the U.S. Focus List as the stock broke out of a stage-one consolidation base into a new all-time high, following a beat-and-raise Q2 FY24 print. Axon makes public safety devices including TASERS and provides cloud-based evidence management services. Diversification beyond the U.S. state and local law enforcement to verticals like the U.S. federal and international markets is expected to drive growth. The launch of its new AI-based tools and hardware range is expected to drive demand for its high-margin software solutions. It has a recurring cash flow-based revenue model, with 95% of its total revenue tied to subscriptions. Consensus expects revenue CAGR of 25% and EPS CAGR of 19% in FY23–25. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Eaton (ETN) – $109B market cap; $689M ADV: We removed Eaton from the U.S. Focus List due to technical deterioration. Despite beat-and-raise Q2 FY24 results,
the stock declined ~9% post print breaching support along its 200-DMA on above average volume, largely due to general market weakness. Mixed segment
performance in Q2 could have weighed down on investor sentiment. Support is at $255.46 (-8%), followed by $240.44 (-14%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Keyence (KEYE.JP; 6861 JP) – $104B market cap; $197M ADV: We removed Keyence from the Developed Markets Focus List as the stock breached support along its 200-DMA on above average volume. It is declining after facing resistance at that level following its Q1 FY25 print. Revenue (+11% y/y) beat estimates by 1%, while EPS (+10% y/y) beat estimates by 2%. Operating margin was 70bps below expectations and could have weighed on investor sentiment. Higher labor costs impacted margins during the quarter. Support is at its previous low of ¥63,520 (-4%), followed by support at ¥62,080 (-6%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Alkhorayef Water & Power Technologies (AWP.SA; AWPT AB) – $2B market cap; $5M ADV: We added Alkhorayef Water & Power Technologies to the Emerging Markets Focus List as the stock bounced off the 21-DMA on above average volume. The company, a market leader with a ~25% market share, specializes in constructing, repairing, and maintaining water infrastructure in Saudi Arabia. Strong relationships with key government entities support Alkhorayef’s business development, tender bids, and maintenance contract renewals. A revenue backlog of $2.4B and a robust project pipeline of $39Bprovides a long runway for revenue growth. Input cost normalization and a higher share of high-margin maintenance work should aid margin expansion. Consensus expects revenue and EPS CAGR of 29% and 51%, respectively, in FY23-25. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Keyence (KEYE.JP; 6861 JP) – $116B market cap; $216M ADV: We added Keyence to the Developed Markets Focus List as the stock bounced off
its 50-DMA and broke out of a stage-one 17-week cup-with-handle base on above average volume. Keyence designs and sells factory automation
equipment. The factory automation market is expected to recover gradually over the next two years, which should drive the company’s revenue
growth. Keyence’s direct sales approach and fabless business model enable industry-leading operating margin. It has a robust balance sheet free of
debt with a strong cash position allowing international business expansion. Consensus expects revenue and EPS CAGR of 11% and 12%,
respectively, in FY24–26. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
E Ink Holdings (PVI.TW): Reported June 2024 monthly sales yesterday after market close. June sales increased to TWD 2,772M (+3% m/m; +19% y/y). Q2 Revenue: TWD 7,656M (+36% q/q; +6% y/y) beat estimates by 12%. This is the first quarterly revenue beat since the start of 2023. The stock is trading in the actionable range of its stage-two 17-week consolidation base. On the downside, support is at its 10-DMA (-2%), followed by its 21-DMA (-5%).
O’Neil Capital Equipment Sector Weekly
Hanwha Aerospace (SGA.KR; 012450 KS) – $9B market cap; $110M ADV: We added Hanwha Aerospace to the Emerging Markets Focus List as the stock is breaking out of a stage-two cup base and is actionable here. Hanwha Aerospace is South Korea’s largest defense contractor, with a strong presence across land systems, advanced weaponry, and the aerospace defense end market. The company is benefiting from increased defense spending, resulting in strong order growth for its products, mainly from Europe and the Middle East. Its land systems segment currently has an order backlog of KRW 30T, ~7x FY23 segment revenue, offering strong visibility, with deliveries peaking in FY26. The higher proportion of exports in the order book is expected to aid margins going forward. Consensus expects a revenue CAGR of 15% over the next two years. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Trex (TREX) – $8B market cap; $61M ADV: We removed Trex from the U.S. Focus List as the stock breached support along its 40-WMA on above
average volume after existing home sales in the U.S. fell for a third straight month in May. The company generates most of its revenue from renovations,
partly driven by existing home sales. A decline in existing home sales could impact renovation demand, which could have weighed down on the investor
sentiment. Support is near $66 (-11%). Fundamental & Technical note
