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On Friday, Rosenblatt Securities analyst Mike Genovese upgraded Viavi Solutions (NASDAQ:VIAV) stock rating from Neutral to Buy, setting a price target of $14.00. The company, with a market capitalization of $2.4 billion and trailing twelve-month revenue of $1 billion, has seen its stock rise 7% year-to-date. According to InvestingPro data, 8 analysts have recently revised their earnings expectations upward for the upcoming period. The upgrade follows Viavi’s impressive performance in its Network Enablement (NE) instruments business during the December quarter, where segment sales rose 15% year-over-year and 26% quarter-over-quarter.
Genovese noted that the growth appears real and sustainable for several more quarters. Viavi’s guidance for the third quarter of 2025 indicates revenues exceeding typical seasonal patterns. The company maintains a strong financial position with a current ratio of 3.55, indicating ample liquidity to support its growth initiatives. InvestingPro analysis reveals several additional positive indicators, with subscribers having access to over 30 key metrics and insights about Viavi’s financial health. This positive outlook is attributed to increased spending by telecommunications and cable companies on Field Test products, which are essential for Fiber Access, Optical, and 5G technologies, especially in North America and Europe.
The analyst also pointed out that original equipment manufacturers (OEMs) are investing more in Lab Test products, with Viavi having exposure to 400G, 800G, and 1.6T Datacom Optical transceivers. This segment, which represents about 10% of NE sales, is growing at a rate surpassing the segment average. Additionally, demand from the Aerospace and Military sectors is bolstering NE’s performance, with these areas also accounting for roughly 10% of NE revenues and experiencing growth above the segment average.
Genovese highlighted the recent pullback in equity markets as an opportunity to upgrade Viavi Solutions, suggesting that the fundamental recovery and strength in the Telecom (BCBA:TECO2m) market have not been fully recognized or reflected in the current stock price. With a robust gross profit margin of 59% and operating with moderate debt levels, the company shows promising fundamentals. For a comprehensive analysis of Viavi’s valuation and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which provides expert insights and actionable intelligence for over 1,400 US stocks. In the broader context, Rosenblatt Securities has reiterated Buy ratings for Adtran (NASDAQ:ADTN) and Ribbon Communications (NASDAQ:RBBN), citing similar reasons for market strength in the Telecom sector.
In contrast to the positive stance on Viavi, Rosenblatt Securities has adjusted its price target for Ciena (NYSE:CIEN), another player in the industry, to account for artificial intelligence (AI) multiples that have contracted. This separate note indicates a more cautious view on Ciena’s valuation in the current market.
In other recent news, Viavi Solutions Inc. reported strong fiscal second-quarter earnings for 2025, with earnings per share (EPS) of $0.13, surpassing analyst expectations of $0.10. The company’s revenue reached $270.8 million, exceeding the forecast of $259.99 million and marking a 6% year-over-year increase. This performance led Argus analysts to raise the price target for Viavi Solutions to $16, maintaining a Buy rating. Viavi’s acquisition plans are also making headlines, as the company announced it will acquire Spirent (LON:SPT) Communications’ high-speed ethernet and network security business lines for $425 million, a move expected to add $180 million in annual revenue post-close.
However, credit rating agencies are scrutinizing Viavi’s financial moves. Moody’s has placed Viavi’s ratings under review for a potential downgrade due to the debt-funded nature of the acquisition. Similarly, S&P Global Ratings has put Viavi on CreditWatch with negative implications, anticipating an increase in the company’s debt-to-EBITDA ratio to 6.4x following the acquisition. Despite these concerns, Viavi’s strategic acquisition is projected to enhance its Ethernet testing solutions and strengthen its market position in digital infrastructure.
The acquisition will be financed through a $425 million term loan B, and Viavi has the option to increase this loan for corporate purposes. As the company navigates these developments, it has expressed optimism about its strategic direction and market opportunities, particularly in the growing 3D sensing and digital infrastructure sectors.
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