Wednesday, on Wall Street, Needham updated its outlook on shares of Ceragon Networks (NASDAQ:CRNT), increasing the price target to $6.00 from the previous $4.50 and maintaining a Buy rating on the stock. Currently trading at $4.39, CRNT has shown remarkable momentum with a 135% return over the past year and is trading near its 52-week high of $4.70.
The firm's adjustment reflects a conservative stance on near-term gross margins due to the expected ramp-up of the lower margin India business in the first half of 2025. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score of 3.34 out of 5.
The updated financial estimates for Ceragon Networks now stand at earnings per share (EPS) of $0.37 for fiscal year 2024 and $0.38 for fiscal year 2025, revised from the earlier projections of $0.39 and $0.43, respectively.
The company's current trailing twelve-month EPS stands at $0.21, with a gross profit margin of 34.8%. This revision takes into account a 100 basis points decrease in near-term net gross margins (NG GM). Despite this, there is an anticipation of a gradual recovery in gross margins as revenue growth is forecasted to strengthen in 2025, bolstered by improving market visibility.
Needham's positive stance is further supported by the management's optimism, which is rooted in a strong order flow and a robust pipeline of opportunities. These opportunities include potential market share gains in Europe as a result of competition with Chinese suppliers, success in private network builds, and the introduction of new products scheduled for market release in fiscal year 2025.
The price target adjustment to $6.00 is based on an enterprise value to earnings (EV/E) multiple of 15 times Needham's fiscal year 2025 earnings estimate. This valuation reflects the firm's confidence in Ceragon Networks' growth trajectory and the company's strategic positioning to capitalize on upcoming market opportunities.
In other recent news, Ceragon Networks reported a solid third quarter in 2024, driven by vigorous demand, especially from India. The company's revenue surged to $102.7 million, marking a 17.7% increase from the same quarter in the previous year.
India's contribution was noteworthy, accounting for a record $50.5 million of the total revenue. Ceragon's non-GAAP operating income rose to $15.8 million, while net income stood at $14.1 million, or $0.16 per diluted share.
The company anticipates its full-year revenue to fall between $390 million and $400 million, reflecting a positive market response to its upcoming product launches. Ceragon also expects a non-GAAP operating margin of at least 10% for the full year.
Despite potential challenges in certain regions, the company's strong performance in India and positive feedback on future products like the IP-50EX Premium and Neptune-based IP-100E indicate a robust market outlook.
These recent developments suggest a promising future for Ceragon Networks, with a continued focus on private networks, defense, public safety, energy, and government sectors. The company also foresees increased e-band deployment in India by 2025 and potential revenues from Siklu's fixed wireless opportunities estimated between $50 million and $150 million over two to three years.
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