Calix stock holds Buy rating and $45 target from Needham

Thursday, Calix (NYSE:CALX) shares maintained their Buy rating and $45.00 price target from Needham, following the company’s fourth-quarter earnings results. Needham analysts highlighted Calix’s revenue and non-GAAP EPS for Q4 2024, which surpassed the consensus estimates marginally by 1% and $0.01, respectively. The company also provided guidance for the first quarter of 2025 that was slightly above expectations, by 1% and $0.02 at the midpoint. According to InvestingPro data, Calix maintains a GOOD financial health score, with analyst price targets ranging from $35 to $50.

Calix reported a stable non-GAAP gross margin of 55.5% for the fourth quarter, a year-over-year increase of 140 basis points. This performance underscores the effectiveness of the company’s shift towards a more software-centric business model. Notably, Calix saw robust growth in its remaining performance obligations and calculated remaining performance obligations, with increases of 34% and 28% year-over-year, respectively.

The company experienced significant growth in its mid-sized customer segment, which surged by 97% quarter-over-quarter, and international revenue, which rose by 47% quarter-over-quarter. This growth is believed to be indicative of resumed purchasing by key customers such as Brightspeed in the United States and CityFibre in the United Kingdom (TADAWUL:4280). However, the small customer segment revenue saw a decline, dropping 22% year-over-year and 12% quarter-over-quarter, marking the lowest revenue for this segment in 15 quarters, which may have been affected by seasonal weather conditions.

Needham’s analysts remain optimistic about Calix’s prospects, expecting the company to continue holding a strong market share in the U.S. rural broadband sector. They anticipate an improving fiber deployment market as the year 2025 progresses, which is expected to benefit Calix’s performance independent of any delays in Broadband Equity, Access, and Deployment (BEAD) subsidies.

The firm’s confidence in Calix is further bolstered by the company’s distinctive software business model, which Needham believes will drive consistent earnings growth for Calix moving forward. Based on InvestingPro’s Fair Value analysis, Calix appears to be trading above its Fair Value. With a market capitalization of $2.45 billion and a beta of 1.68, investors should note the stock’s higher volatility compared to the market. Discover detailed valuation metrics and access the comprehensive Pro Research Report, available for Calix and 1,400+ other US stocks on InvestingPro.

In other recent news, Calix, Inc. reported a solid third quarter in 2024, highlighted by a slight revenue increase and record non-GAAP gross margins. The company’s revenue reached $201 million, marking a 1.4% sequential increase, while non-GAAP gross margin hit a record high of 55.4%. Calix’s Remaining Performance Obligations (RPOs) also saw a significant uptick, growing to $296 million, which represents an 11% increase from the previous quarter and a 35% increase year-over-year. This growth in RPOs signals a strong future demand for the company’s services.

In terms of future prospects, Calix anticipates modest revenue growth in Q4 2024, with projections ranging between $201 million and $207 million. The BEAD program is expected to contribute to this growth, with initial orders forecasted for Q1 2025 and shipments to follow throughout the year. Despite facing competition from major players such as Amazon (NASDAQ:AMZN) in the BEAD space, Calix’s leadership remains confident, viewing the competition as a validation of the market’s competitiveness. The company also dismissed concerns about potential political risks affecting the BEAD program due to its bipartisan support.

These recent developments underscore Calix’s strong position in the market and its potential for steady growth, backed by strategic initiatives and a favorable outlook on the BEAD program.

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