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On Tuesday, Needham analysts adjusted their outlook on Harmonic Inc . (NASDAQ:HLIT), lowering the price target to $14 from $18 while maintaining a Buy rating on the stock. The revision followed Harmonic’s release of its fourth-quarter 2024 results, which showcased a significant 33% year-over-year revenue increase and a $0.32 rise in earnings per share (EPS). According to InvestingPro data, the company appears slightly undervalued, with a healthy current ratio of 2.08 indicating strong short-term financial stability. The stock’s RSI suggests it’s currently in oversold territory, potentially presenting an opportunity for investors. Despite the strong performance in the quarter, the company’s forecast for fiscal year 2025 was less optimistic than expected, attributed to reduced demand from key clients Comcast (NASDAQ:CMCSA) and Charter.
The company’s 4Q broadband revenue saw a substantial 48% year-over-year growth, yet overall orders dropped by 24% compared to the previous year. Despite these mixed signals, InvestingPro analysis shows Harmonic maintains a robust gross profit margin of 51.92% and operates with a moderate debt level. Analysts at Needham believe that the anticipated transition by Comcast to a new DOCSIS 4 Unified (D4U) network and challenges with multi-vendor integration at both Comcast and Charter contributed to the less favorable fiscal 2025 outlook. They also pointed to likely seasonal inventory build-up by customers as a reason for the weak first-quarter guidance.
Despite the reduced guidance, Needham sees the shift to D4U as potentially beneficial for Harmonic’s competitive position in the market, noting the company faces few competitive threats. With this perspective, the analysts have significantly reduced their fiscal year 2025 estimates and introduced their fiscal year 2026 projections, which they believe could see a strong upside when industry spending rebounds.
In summary, the price target adjustment reflects a cautious short-term outlook for Harmonic due to current customer demand fluctuations and integration challenges. However, the long-term perspective remains positive, with expectations of a market position improvement and a potential increase in industry spending benefitting the company in the following fiscal year. InvestingPro subscribers can access 6 additional key insights about Harmonic, including detailed financial health scores and comprehensive valuation metrics in the Pro Research Report, helping investors make more informed decisions about this telecommunications equipment provider.
In other recent news, Harmonic Inc. reported robust fourth quarter results, exceeding analyst expectations. The company’s adjusted earnings per share came in at $0.45, surpassing the projected $0.37. Revenue for the quarter was $222.2 million, beating the consensus of $219.95 million and marking a 33% year-over-year increase. However, Harmonic’s guidance for 2025 fell short of expectations, with the company forecasting earnings per share between $0.02 and $0.08 on revenue of $120-$135 million for Q1 2025. This is significantly below analyst projections of $0.12 earnings per share and $149.39 million in revenue. The company attributes this lower guidance to shifts in customer deployment timing as operators transition to Unified DOCSIS 4.0. Despite these projections, Harmonic’s board has authorized a new $200 million share repurchase program, doubling its previous program. These are some of the recent developments at Harmonic Inc.
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