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Max Manturov

Max Manturov

Head of investment research regulated by CySec 30.09.2021

Five Ideas for Investing in Tech Bonds

Investors continue to be drawn to the technology sector. Investing in the stocks of individual IT companies on the other hand, is extremely risky. However, there is another option: purchasing corporate bonds, which will provide a consistent coupon yield. This selection includes five assets chosen by our analysts based on their profitability ratios and the level of risk connected with the extent of the companies' debt burden. We advise you to include these bonds in your portfolio.

Xerox Corp. (BB rating)

ISIN: US984121CB79.
Current price in %: 111.88.
Face value: $ 1,000.
Coupon rate: 6.75%.
Next call: -
Yield to worst call / maturity: 5.67%
Coupon type: fixed.
Maturity date: 12/15/2039
Loan outstanding: $350 million

Xerox Holdings Corporation is a technology company that develops enterprise software and hardware. The company creates products in artificial intelligence (AI), the Internet of Things (IoT), digital packaging, 3D printing, and clean technologies (CleanTech). Xerox technologies enable businesses to construct infrastructure that improves print efficiency, while lowering its cost. They also automate workspaces and secure data.

Debt level:

• cash and equivalents: $2625 million

• Net debt: $4453 million

• debt to equity ratio: 76.64%;

• Net debt/EBITDA for the last 12 months: 1.99x;

• EBIT to interest coverage over the last 12 months: 5.88x;

• free cash flow (last 12 months): $474 million

Buy bonds of Xerox Corp. >>

NortonLifeLock Inc. (BB-)

ISIN: USU78585AC73.
Current price in %: 100.5.
Face value: $1,000.
Coupon rate: 5%.
Next call: 04/15/2022.
Yield to worst call/maturity: 4.05%
Coupon type: fixed.
Maturity date: 04/15/2025
Loan outstanding: $1100 million

NortonLifeLock Inc. offers a cybersecurity platform to customers. Clients can use it to ensure their privacy on the Internet and safeguard their devices, personal data, and home networks against cybercrime.

The company provides its services both directly by subscription and through distribution partners, which include merchants, telecommunications service providers, and equipment makers (OEMs).

Debt level:

• cash and equivalents: $ 933 million;

• Net debt: $3601 million;

• debt to equity ratio: -

• Net debt / EBITDA for the last 12 months: 2.05x;

• EBIT to interest coverage for the last 12 months: 7.27x;

• free cash flow, last 12 months: $700 million

Buy bonds of NortonLifeLock Inc. >>

Hewlett Packard Enterprise (BBB-)

ISIN: US42824CAY57.
Current price in %: 136.38.
Face value: $ 1,000.
Coupon rate: 6.35%.
Next call: 04/15/2045.
Yield to worst call / maturity: 3.95%
Coupon type: fixed.
Maturity date: 10/15/2045
Loan outstanding: $1492,42 million

Hewlett Packard provides a platform for connecting edge devices to the cloud to enterprise customers. In addition, the company offers high-performance computing outsourcing, storage management, consultancy, and financial services. Hewlett Packard assists companies in reducing the cost of integrating IT solutions into their operations. In addition, the company has a division that is responsible for research and development.

Debt level:

• cash and equivalents: $4233 million

• Net debt: $15941 million

• debt to equity ratio: 99.04%;

• Net debt / EBITDA for the last 12 months: 2.36x;

• EBIT to interest coverage over the last 12 months: 4.78x;

• free cash flow, last 12 months: - $ 143 million

Buy Hewlett Packard Enterprise Bonds >>

Seagate HDD Cayman (BB +)

ISIN: US81180WAN11.
Current price in %: 117.5.
Face value: $ 1,000.
Coupon rate: 5.75%.
Next call: 06/01/2034.
Yield to worst: 3.93%
Coupon type: fixed.
Maturity date: 01.12.2034
Loan outstanding: $ 490 million
Sector: technology

Seagate Technology is a data storage solutions provider. The company specializes in the manufacturing of hard disk drives (HDD). Seagate also manufactures more advanced storage products such as solid-state drives, PCIe cards, and serial data interface (SATA) controllers. The company provides high-performance computer solutions to corporate clients.

Debt level:

• cash and equivalents: $ 658 million;

• Net debt: $5139 million;

• debt to equity ratio: 814.42%;

• Net debt / EBITDA for the last 12 months: 1.68x;

• EBIT to interest coverage for the last 12 months: 6.82x;

• free cash flow last 12 months: $1128 million;

Buy Seagate HDD Cayman Bonds >>

Uber Technologies Inc. (B-)

Current price in %: 107.5.
Face value: $ 1,000.
Coupon rate: 6.25%.
Next call: 09/15/2023.
Yield to worst call / maturity: 3.54%
Coupon type: fixed.
Maturity date: 15.01.2028.
Loan outstanding: $ 500 million

Uber Technologies Inc. (Uber) owns a mobile app development and management platform. The company helps customers discover service providers - carriers (including public transportation), food delivery services, and suppliers. Users can book trips in cars, auto rickshaws, motorcycles, and minibuses using the Uber app. The delivery app allows you to look for nearby restaurants and order food for delivery or pickup.

Debt level:

• cash and equivalents: $5647 million

• Net debt: $8232 million

• debt to equity ratio: 59.85%;

• net debt / EBITDA for the last 12 months: -

• EBIT to interest coverage for the last 12 months: - 8.80x;

• free cash flow, last 12 months: - $3361 million

Buy Uber Technologies Inc bonds >>

How Do I Buy Bonds?

If you do not already have an investment account, open it right now - you can do it online in 10 minutes. To do this, all you need to do is fill out a short questionnaire and go through verification.

After opening an account, you can buy bonds in these convenient ways:

1. Via the Freedom24 web-based trading platform. Search for ISIN bonds in the "Web Terminal" section. From the search results, select the company you want. Next, open a securities section in the trading window (on the right), pick the needed amount of bonds, and click the "Place a buy order" button.

2. Via the Freedom24 app for iPhone App and Android. In the "Quotes" window, click the search icon in the upper right corner. In the search window, type the company's ISIN and then choose the needed company from the list of results. Click on it and select the "Order" tab in the opened card. Specify the required number of bonds and click the "Place a buy order" button.     

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Europe Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance Europe Ltd. do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance Europe Ltd. and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

  • Sources of information

  • Recommendation evaluation methodology in accordance with Terms and Conditions of Market Research Use
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.