Rosenblatt has maintained a Buy rating on Ribbon Communications (NASDAQ: NASDAQ:RBBN) with a steady price target of $5.00.
The firm's optimism is based on expectations that the second half of 2024 (2H24) will align with current consensus forecasts for significant growth in both the latter half of 2024 and the first half of 2024.
Revenue and earnings per share (EPS) are projected to grow by 8% and 13% year-over-year, respectively, in 2H24.
The company is anticipated to achieve $20 million in revenue growth, a 10% increase sequentially, for the third quarter of 2024 (3Q24). Notably, a substantial portion of this growth was realized early in the quarter following the closure of a major Federal Cloud & Edge deal that had been delayed from the end of the second quarter.
The rest of the sequential revenue increase is expected to come from consistent business with Verizon (NYSE:VZ), other U.S. Cloud & Edge customers, increased spending in India by Vodafone (NASDAQ:VOD), and growing rural Optical sales in the United States.
These positive factors are predicted to persist into the fourth quarter of 2024 (4Q24), with added momentum from improved seasonal trends in Europe, particularly within the Cloud & Edge segment. With Cloud & Edge positioned as a growing business, Ribbon Communications is seeing an uptick in operating margins and earnings.
The $5 price target set by Rosenblatt is derived from a valuation of approximately 14 times the projected 2025 EPS and 12 times the 2026 EPS. These figures represent nearly a 30% discount to the trading averages of peer companies in the sector.
The firm also acknowledged that one-time occurrences negatively influenced the second quarter of 2024 (2Q24) results, such as the delayed Federal deal and the cessation of shipments to Russia, but these are not expected to recur in the second half of the year.
In other recent news, Ribbon Communications Inc. has been the focus of several developments. The company's second-quarter earnings report for 2024 showed improved margins and EBITDA, despite the exclusion of operations in Russia.
Analysts at Rosenblatt have reiterated their Buy rating for Ribbon, expressing confidence in the firm's financial health and growth prospects. Ribbon also confirmed the successful closure and shipment of a significant Federal deal, initially delayed from the second quarter.
The company's CFO, Miguel "Mick" Lopez, announced his retirement, initiating a search for his successor. Ribbon's Q2 2024 revenues were $193 million, reflecting a decrease from the previous year, but an improved non-GAAP net income of $9 million. The company anticipates a 25% revenue increase in the second half of 2024 compared to the first half, setting full-year revenue guidance between $830 million and $850 million.
Ribbon's recent earnings call reported a mixed financial performance for Q2 2024 with revenues falling short of guidance but an improvement in non-GAAP net income. Despite lower sales in Eastern Europe and a delayed US Federal deal, the company remains optimistic about significant improvements in 2024, supported by strategic partnerships and market opportunities.
InvestingPro Insights
As Ribbon Communications (NASDAQ:RBBN) navigates a period of anticipated growth, real-time data and insights from InvestingPro provide a deeper understanding of the company's financial health and market position. With a current market capitalization of $552.38 million, Ribbon Communications is trading at a negative P/E ratio, reflecting the challenges it faces in achieving profitability. Despite these challenges, analysts on InvestingPro predict that the company will turn profitable this year, which could signal a potential upside for investors.
InvestingPro data shows a recent decline in revenue growth, with a -4.26% change over the last twelve months as of Q2 2024. However, the company maintains a strong gross profit margin of 55.07%, which may support improved operating margins as highlighted by Rosenblatt. Additionally, Ribbon Communications is currently trading at 79.49% of its 52-week high, with a fair value estimate of $3.78 according to InvestingPro's metrics, compared to the analyst target of $6.00. This disparity may indicate room for stock price appreciation if the company meets or exceeds market expectations.
InvestingPro Tips further reveal that Ribbon Communications does not pay a dividend, which may influence the investment decisions of income-focused shareholders. Moreover, the company's EBIT valuation multiple is considered high, which could suggest that the stock is priced optimistically relative to its earnings before interest and taxes.
For investors seeking additional insights, there are more InvestingPro Tips available for Ribbon Communications at https://www.investing.com/pro/RBBN, providing a comprehensive analysis that could further inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.