Tuesday, Rosenblatt Securities revised its price target for Calix (NYSE: NYSE:CALX) shares, a provider of cloud and software platforms for broadband service providers, reducing it to $35 from the previous $45 while maintaining a Buy rating on the stock.
The adjustment in price target comes as Calix provided a second-quarter 2024 forecast that was significantly below the market consensus, citing new delays by large and medium U.S. broadband service providers (BSPs).
These delays are due to some customers extending their spending plan evaluations further into 2024, while others have chosen to concentrate on adding new subscribers to their current networks instead of aggressively expanding their footprint this year.
In the first quarter of 2024, small customers accounted for 81% of sales, up from 71% in the fourth quarter of 2023. This customer segment is reportedly stabilizing, as they navigate challenges such as applying for stimulus funds and managing inventory due to shorter lead times.
Despite the lowered guidance, Rosenblatt Securities reaffirms its Buy rating for Calix. The firm's long-term outlook remains positive, anchored by the belief that the Broadband Equity, Access, and Deployment (BEAD) program will act as a significant catalyst for the company by 2025. Analysts at Rosenblatt project an annual growth rate of 10%-15% starting in 2025 for Calix, driven by its unique high-margin recurring revenue model.
The new price target of $35 is based on a 2.2x enterprise value to projected 2025 sales, which is slightly below the 2.3x average for the analyst's coverage group. This valuation reflects Rosenblatt's confidence in Calix's long-term growth potential despite the near-term challenges faced by the company.
InvestingPro Insights
Following the recent update from Rosenblatt Securities on Calix's future prospects, a look at the current financial metrics from InvestingPro can provide a more nuanced understanding of the company's position. Calix's adjusted market capitalization stands at approximately $1.93 billion, with a relatively high price-to-earnings ratio of 65.88, indicating that investors may expect high growth rates in the future. Notably, the company has demonstrated robust revenue growth over the last twelve months, with an increase of nearly 19.79%, signaling a strong sales performance despite the broader market challenges.
From the InvestingPro Tips, two key insights emerge: Calix holds more cash than debt, which is a positive sign for financial stability, and the stock is currently in oversold territory according to the Relative Strength Index (RSI), potentially indicating an entry point for investors. Additionally, it's worth noting that Calix's liquid assets exceed its short-term obligations, further underscoring the company's sound liquidity position.
For those interested in a deeper analysis, InvestingPro offers even more tips on Calix, which can be found at https://www.investing.com/pro/CALX. Utilize the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of 15 additional InvestingPro Tips to inform your investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.