On Monday, an analyst from JPMorgan adjusted the price target for Calix (NYSE: NYSE:CALX) shares, a provider of cloud and software platforms for broadband service providers, to $41.00 from the previous target of $28.00. The firm has maintained a Neutral rating on the stock.
The new price target reflects an anticipation of robust demand for network equipment due to accelerating approvals of State plans for the Broadband Equity, Access, and Deployment (BEAD) program and a possible decrease in interest rates, which would lower the cost of capital for Calix's customers.
The analyst noted that Calix is at a pivotal point where these factors are expected to drive demand starting in the fiscal year 2025. However, there are concerns among investors about potential financial downsides in 2024 before the benefits of the BEAD program are realized. Calix is expected to reassure investors by reinforcing the idea that the second quarter of 2024's revenues could be the lowest point before sequential improvements occur.
Investors are also looking for clarity on the extent of the ramp-up in demand expected in 2025 due to the BEAD program. While there are concerns that the BEAD-related tailwinds might not become significant until 2026, the company is likely to use the accelerated pace of State plan approvals to demonstrate potential growth in the next year.
The third quarter of 2024's revenue guidance is anticipated to show modest sequential improvement from the second quarter, providing more visibility into the company's financials for that year.
The firm is awaiting further visibility on Calix's performance but has set a December 2025 price target to mirror the improving fundamentals associated with the BEAD program.
In the long term, the analyst expects investors will focus on Calix's ability to achieve secular growth through the cross-selling of Cloud and Managed services, which could influence whether the stock will command the high premium it has in recent years.
In other recent news, Calix, Inc. reported its Q1 2024 earnings, achieving revenue of $226.3 million, meeting its guidance. Despite a decline in revenue due to larger customers re-evaluating their capital expenditures, the company remains optimistic about the future.
Analysts from Jefferies, Craig-Hallum, and Roth/MKM have adjusted their price targets for Calix, citing concerns about delays in the BEAD program, changes in spending patterns among large customers, and muted deployment patterns among medium and large broadband service providers.
Jefferies downgraded Calix from Buy to Hold and lowered the price target to $30.00, while Craig-Hallum and Roth/MKM maintain a Buy rating with revised price targets of $41.00 and $43.00 respectively. These adjustments reflect recent developments in Calix's operations and market conditions.
Despite these challenges, Calix's management anticipates a rebound in revenue growth, targeting a 20% growth rate for fiscal year 2025, driven by new network builds and government funding programs like BEAD.
InvestingPro Insights
Investors considering Calix's financial position will find that the company holds a strong cash position relative to its debt, a factor that could provide financial flexibility in uncertain times. Additionally, the latest data from InvestingPro shows Calix with a market capitalization of $2.38 billion and a high price-to-earnings (P/E) ratio of 121.23, indicating that the stock is trading at a premium compared to earnings. Despite a notable 8.9% revenue growth in the last twelve months as of Q1 2024, analysts have flagged concerns, such as a sales decline expected in the current year and a significant number of analysts revising their earnings expectations downwards for the upcoming period.
On the upside, Calix has demonstrated a strong return over the past three months, with a price total return of 23.04%, which could signal investor confidence in the company's near-term prospects. For those seeking more in-depth analysis, there are additional InvestingPro Tips available, which further explore the company's valuation multiples, volatility, and profitability outlook. Interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to these valuable insights and more.
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