On Wednesday, Rosenblatt Securities adjusted its outlook on Calix Inc (NYSE: NYSE:CALX) shares, raising the price target to $45 from the previous $35, while reaffirming a Buy rating on the company's stock. The firm's decision comes despite a revision of the revenue and earnings per share (EPS) estimates for 2024 and 2025.
The analyst noted that while they no longer anticipate Calix to achieve a revenue growth of over 10% in 2025, the company's strengths lie in its unique Cloud-based platform which supports Broadband Service Providers (BSPs). This platform is credited with enabling profitable subscriber growth despite a downturn in new network constructions.
The analyst emphasized that positive indicators for Calix include gross margins (GMs), free cash flow (FCF), remaining performance obligations (RPOs), new customer acquisitions, and deals related to Platform and Managed Services.
Calix's management anticipates orders from the Broadband Equity, Access, and Deployment (BEAD) program to commence in early 2025. The firm predicts that Calix will return to double-digit revenue growth in the second half of 2025 and continue into 2026.
The revised price target of $45 is based on an enterprise value to 2025 sales multiple of 3.2 times. This valuation is consistent with the average of the group covered by Rosenblatt, which ranges from 0.8 times to 13.8 times, with a mean of 3.2 times. The increase in the price target reflects confidence in the company's business model and market position, despite current challenges in the industry.
In other recent news, broadband communications provider Calix, Inc. reported a record non-GAAP gross margin and a revenue of $198 million for the second quarter of 2024.
The company also noted a 9% sequential increase in Remaining Performance Obligations (RPOs), driven by growth in cloud and managed services. Calix management expressed confidence in the company's strategic positioning, forecasting orders from the Broadband Expansion and Access (BEAD) program to begin in early 2025.
Despite recent declines in appliance sales, the company is experiencing strong platform adoption and growth in cloud and managed services. Calix's robust supply chain and government program experience position it well to capitalize on the BEAD program. These recent developments make it clear that Calix is strategically aligning itself for future growth while navigating current market challenges.
InvestingPro Insights
In light of Rosenblatt Securities' updated outlook on Calix Inc (NYSE: CALX), examining the company through the lens of InvestingPro data and tips provides additional context for investors. With a market capitalization of approximately $2.3 billion and a strikingly high P/E ratio of 926.32, Calix presents a unique profile. The company's P/E ratio has slightly adjusted in the last twelve months as of Q2 2024, sitting at 918.77. Despite a revenue decline of 3.92% in the same period, Calix holds more cash than debt, indicating a strong balance sheet, as reflected by an InvestingPro Tip.
Another notable InvestingPro Tip is that analysts have revised their earnings forecasts downwards for the upcoming period, which may warrant caution for prospective investors. However, it's important to recognize that the company has had a strong return over the last three months, with a 24.04% price total return, showcasing recent investor confidence.
For those interested in a deeper dive into Calix's financials and future prospects, InvestingPro offers additional tips that can be accessed at: https://www.investing.com/pro/CALX. There are several more tips available, including insights into the company's sales expectations, earnings multiples, and profitability forecasts. To enhance your investment research, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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