Why CALX Stock Could Be Set to Rise
The only thing that interrupted Calix Inc‘s (NYSE:CALX) stellar stock market run over the past few years was the overall market sentiment in 2022.
Frankly, last year was brutal for stocks, especially tech stocks. The S&P 500 capped off one of its worst years, down by roughly 20% in 2022. The Nasdaq had an even tougher year, down by about 35%.
Calix Inc is an award-winning cloud and software company that serves broadband providers, including those that provide 5G service. The company’s platforms give real-time data and insights to its clients so they can simplify their business and improve their customer service and marketing. (Source: “Letter to Stockholders,” Calix Inc, October 24, 2022.)
The company has been making an effort to diversify its customer base, gaining about 100 new customers per year (as of March 2020). (Source: “Calix Investor Day,” Calix Inc, March 4, 2020.)
Despite ongoing market volatility, some stocks have defied the broader sell-off and have recouped some of their losses on the heels of superb financial results and strong guidance. That’s what’s been happening with Calix stock.
From the start of 2020 through 2021, shares of Calix Inc rallied by a whopping 900%. CALX stock entered 2022 trading at a record level, but we all know what rising interest rates and decades-high inflation did to stock prices last year.
Calix stock ended 2022 down by roughly 15%, but it advanced about 100% over the last six months of the year.
Why? Despite economic headwinds, Calix Inc continued to report excellent financial results. the company reported record second-quarter and third-quarter results and provided strong guidance.
Despite the company’s recent share-price gains, its management team thinks Calix stock is a bargain. Calix Inc’s board authorized a one-year $100.0-million share-repurchase plan.
CALX stock still has plenty of room to run, even according to conservative Wall Street. Analysts’ 12-month share-price target is in the range of $81.57 to $95.00, which points to potential upside in the range of approximately 19% to 40%.
Chart courtesy of StockCharts.com
Record Q3 Revenues & Strong Guidance
For the third quarter ended October 1, 2022, Calix announced that its revenue came in above the high end of its guidance, up by 38% year-over-year to $236.3 million. (Source: Calix Inc, October 24, 2022, op. cit.)
The company’s Systems revenue increased by 38% in the third quarter, while its Services revenue increased by 14%. Its “EXOS” platform revenue went up by 81% to a record level and its “AXOS” platform revenue increased by 118%, also to a record level.
Calix Inc’s third-quarter 2022 net income was $13.4 million, or $0.19 per share. Its adjusted earnings were $23.8 million, compared to $23.9 million in the third quarter of 2021.
The company ended the third quarter of 2022 with record cash and investments of $234.7 million, up by $9.8 million sequentially. The increase was helped by third-quarter cash flow of $21.2 million.
During the third quarter of 2022, Calix Inc gained 26 new customers. The company’s “Calix Marketing Cloud” customers increased by 28% in the quarter.
For the fourth quarter, Calix Inc expects to report revenues in the range of $237.0 to $243.0 million, which, at the midpoint, represents a year-over-year increase of 36% and a sequential gain of two percent. It also expects net income of $0.22 to $0.28 per diluted share.
For full-year 2022, management’s guidance represents a year-over-year revenue increase of 27% at the midpoint.
The stock market isn’t running on all cylinders these days, but Calix Inc is.
In 2022, the company delivered record revenues in the second and third quarters—despite ongoing global supply chain challenges. Moreover, management has provided strong guidance for the fourth quarter and full year.
If Calix stock can perform this well during one of the toughest economic periods, it will be interesting to see how it performs once the market and investor sentiment rebounds.