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On Monday, Rosenblatt reiterated a Buy rating on Ribbon Communications (NASDAQ:RBBN) with a price target of $5.50. Currently trading at $4.1, the stock is near its 52-week high of $4.38 and has delivered an impressive 41.38% return year-to-date, according to InvestingPro data.
The firm's analysts expect Ribbon to report strong fourth-quarter results for 2024, with the next earnings announcement scheduled for February 12, 2025. The anticipated consensus revenues of $244 million represent an increase of 16% quarter-over-quarter and 8% year-over-year.
The gross margin (GM) is estimated to be around 55.8%, aligning with the company's current gross margin of 55.24%, showing an improvement of approximately 50 basis points from the previous quarter. Additionally, the operating margin is projected to expand both sequentially and year-over-year to over 18%. InvestingPro subscribers can access more detailed financial metrics and 6 additional exclusive ProTips about Ribbon's performance.
Earnings per share (EPS) are expected to significantly rise from the previous quarter and show a slight increase from the same period last year, reaching $0.13. The optimism surrounding Ribbon Communications is partly due to Verizon (NYSE:VZ)'s decision to retire legacy Time-Division Multiplexing (TDM) switching platforms and transition to cloud-based Voice over Internet Protocol (VoIP) technologies, which is seen as a positive development for the company.
Ribbon's Cloud & Edge segment, known for its high margins, is reportedly regaining momentum as a growth business. This resurgence is likely to be further supported by AT&T's recently disclosed plans to retire all of its legacy voice networks by the end of 2025, which could present additional opportunities for Ribbon.
The analysts highlighted Ribbon's appeal as an investment, noting its position as the least expensive stock within their coverage, trading at approximately 11.5 times their 2026 EPS forecast. With a current market capitalization of $719 million and analysts forecasting profitability this year, the investment story appears compelling.
The $5.50 price target is based on a multiple of 15 times earnings, which is considered conservative when compared to the broader sector's trading range of 15 to 42 times earnings, with an average of 24 times. For a comprehensive analysis of Ribbon's valuation and growth potential, investors can access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, Ribbon Communications has reported steady growth in its Q3 financial results for 2024, with a notable increase in sales to $210 million, driven primarily by growth in the Cloud & Edge segment. This performance surpassed the AEBITDA consensus estimate of $26.9 million. In addition, B.Riley reiterated its Buy rating on Ribbon Communications with a steady price target of $6.00, emphasizing the company's positive trajectory in key financial metrics such as revenue and profitability.
The company's fourth quarter is anticipated to show approximately an 8% year-over-year sales growth, with revenue estimates ranging between $235 million and $255 million. Ribbon Communications also projects mid-single-digit revenue growth for 2025. Despite a 6% decline in IP Optical revenue, the company experienced a 60% sales increase in the federal and defense sector.
The potential for voice modernization projects with Verizon and new account opportunities due to the upcoming merger of Nokia (HE:NOKIA) and Infinera (NASDAQ:INFN) were also highlighted. These recent developments indicate Ribbon Communications' continued efforts to capitalize on growth opportunities while navigating market challenges.
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