On Thursday, Jefferies made a significant adjustment to its stance on Calix, Inc. (NYSE:CALX), downgrading the stock from Buy to Hold. Accompanying this downgrade, the firm also reduced the price target to $30.00, a substantial decrease from the previous target of $48.00.
The revision in rating and price target comes amid concerns about delays in the BEAD program, which is a key interest area for investors. Jefferies cited the sustained aggressive investments that Calix is making in its operations as a reason for caution. Additionally, there is uncertainty regarding when the performance of Calix's two larger customers will see improvement.
Jefferies also noted that their estimates for Calix's software segment have been modestly lowered. This adjustment reflects a more conservative outlook on that part of the business.
A significant point of concern highlighted by Jefferies is the composition of Calix's net income, where stock compensation represents a considerable part. This factor contributed to the firm's decision to lower the valuation, making it difficult to justify a premium price for Calix shares.
The new price target of $30.00 set by Jefferies now reflects the firm's revised expectations for Calix's stock performance. This latest financial assessment follows the company's ongoing strategic investments and market uncertainties affecting its customer base.
InvestingPro Insights
Amid Jefferies' recent downgrade of Calix, Inc. (NYSE:CALX) from Buy to Hold, real-time data and insights from InvestingPro provide additional context for investors considering the stock's current position. An InvestingPro Tip highlights that management has been actively buying back shares, which could signal confidence in the company's future prospects. Moreover, Calix is noted for holding more cash than debt on its balance sheet, potentially providing a buffer against market uncertainties and operational investments.
InvestingPro Data further enriches the picture with a current market capitalization of $1.85 billion and a high price-to-earnings (P/E) ratio of 99.28, suggesting a premium valuation relative to earnings. Additionally, while revenue has grown by 8.9% over the last twelve months as of Q1 2024, the revenue growth rate for Q1 2024 shows a decline of 9.48%, aligning with Jefferies' cautious stance on the company's near-term performance.
For those seeking more comprehensive analysis, InvestingPro offers additional tips, including insights on stock price volatility and valuation multiples. To access these insights and more, check out InvestingPro's full suite of tips for Calix at https://www.investing.com/pro/CALX. Discover how to leverage these tips and make informed decisions with an exclusive offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are over 15 additional InvestingPro Tips available for Calix, providing a deeper dive into the company's financial health and market potential.
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