CALX Stock Could Rise by Up to 26%
Shares of Calix Inc (NYSE:CALX) have faced the same macroeconomic headwinds as the rest of the stock market, and that led Calix stock to go significantly lower in the first half of 2022. It’s been a different story in the second half of the year. Three consecutive quarters of record financial results might have helped with that.
CALX stock entered 2022 on a bullish note, having hit a new record high of $80.95 on December 31, 2021. Like other stocks, especially tech stocks, Calix stock tumbled in the opening days of 2022 as decades-high inflation and rising interest rates took a bite out of investor sentiment.
During the first six months of 2022, CALX stock lost roughly 60% of its value. Shares of Calix Inc have been on the rebound since the middle of June, up by 120% (as of this writing).
Over the same time frame, the S&P 500 has only gone up by 11% and the Nasdaq has only gone up by about seven percent. In addition to soundly trumping those gains, Calix stock has been consistently climbing since the summer. The S&P 500 and Nasdaq have been volatile since then, with their recent gains coming on the heels of an unsustainable bear-market rally.
As mentioned earlier, investor optimism for CALX stock is being fueled by three quarters of record financial results.
In the third quarter, Calix Inc delivered record quarterly revenues in spite of ongoing global supply challenges. Moreover, the company ended the quarter with record cash and investments.
Calix Inc has continued to generate positive operating and adjusted free cash flow, and management expects this trend to continue. The company’s management has provided solid guidance for the fourth quarter and full year.
This is why Calix stock has been on such a tear over the last two quarters and why Wall Street thinks CALX stock has a lot more room to run. Analysts have provided a 12-month share-price forecast in the range of $88.71 to $95.00. This points to potential gains in the range of 17% to 26%.
Chart courtesy of StockCharts.com
How does the forecast for Calix stock compare to the forecast for the broader market?
Analysts predict that the S&P 500 will close out 2023 at 4,493.50. This implies an 11.2% increase from its current level. Industry analysts, however, tend to wildly overestimate how well the S&P 500 will perform in an upcoming year. (Source: “Industry Analysts Predict a 13% Price Increase for S&P 500 in 2023,” FactSet, December 12, 2022.)
Calix Inc Overview
Calix offers cloud and software platforms that give real-time data and insights to communications service providers so they can simplify their operations and improve their customer experience. (Source: “Investor Relations,” Calix Inc, last accessed December 22.)
The company’s award-winning cloud and software platforms help communication services providers market and deliver a range of services, from basic voice and data to advanced broadband services.
Calix Inc had been making an effort to diversify its customer base, managing to add about 100 new customers per year (as of March 2020). (Source: “Calix Investor Day,” Calix Inc, March 4, 2020.)
Record Q3 Revenue
For the third quarter ended October 1, Calix announced that its revenue came in above the high end of its guidance, up by 37% year-over-year to a record $236.3 million. Its systems revenue increased by 38% year-over-year, while its services revenue increased by four percent. (Source: “Letter to Stockholders,” Calix Inc, October 24, 2022.)
The company’s third-quarter net income was $13.4 million, or $0.19 per share, down from $177.4 million in the third quarter of 2021. Compared to the second quarter, however, Calix Inc’s net income increased by $5.9 million.
The big year-over-year drop in net income was primarily due to the reversal of a substantial portion of the valuation allowance against the company’s deferred tax assets.
Calix Inc’s adjusted net income in the third quarter was $23.8 million, or $0.34 per share, topping the analyst estimates of $0.23 per share.
The company ended the third quarter with record cash and investments of $234.7 million, up by $46.0 million year-over-year. The increase was helped in large part by third-quarter cash flow of $21.2 million.
Also during the third quarter, Calix Inc:
- Added 26 new broadband service providers customers
- Increased the number of its “Calix Marketing Cloud” customers by 28%
- Increased the revenue from its “Experience Innovation Platform” by 81% to a record level
- Increased the revenue from its “Network Innovation Platform” by 118% to a record level
For the fourth quarter, Calix Inc expects to report revenues in the range of $237.0 to $243.0 million. At the midpoint, that’s growth of 36% year-over-year and two percent sequentially. Management forecasts that the company’s net income in the fourth quarter will be in the range of $0.06 to $0.12 per diluted share.
The company projects that its full-year 2022 revenue will increase by 27% year-over-year.
Despite supply chain problems and other economic headwinds, Calix Inc continues to report record financial results, with high growth coming from all areas of its business.
The company says there are at least four quarters of supply chain unpredictability ahead. Still, management provided impressive guidance for the fourth quarter, and they expect the positive trend to continue after that.
Despite a probable recession in 2023, CALX stock is a tech stock worth keeping your eyes on.