DZS Stock, an Under-the-Radar 5G Stock, Poised to Double

DZSI Stock Bullish on Record Financials & Major Acquisitions

DZS Inc (NASDAQ:DZSI) is a great, under-the-radar 5G stock that has been seriously outpacing the broader market. At a time when the S&P 500 is in correction territory and the Nasdaq is in bear-market territory, DZS stock is up by 33% over the last three months and up by 40% over the last six months.

DZSI stock’s recent gains aren’t a fluke; DZS Inc’s share price has held onto gains it made since the coronavirus-fueled stock market crash in March 2020. Since that period, DZS stock has rallied by 560%.

Despite those big gains, the vast majority of Wall Street analysts think DZSI stock still has plenty of room to run. Of the analysts providing a 12-month share-price target for DZS Inc, their average estimate is $27.20 and their high estimate is $35.00. This points to potential growth in the range of 42% to 83%.

There are plenty of reasons to be bullish on DZS stock. In 2021, DZS Inc reported record orders (up by 62% to $504.0 million), revenue (up by 16% to $350.0 million), and backlog ($225.0 million).

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Moreover, in 2021, DZS Inc launched 29 new products and gained 105 new customers. That momentum has continued in 2022 with a record backlog of $243.0 million.

The company also recently closed on its acquisition of ASSIA, Inc.’s customer-experience software portfolio. (Source: “DZS Completes Acquisition of Consumer Experience, Service Assurance Software Portfolio From ASSIA,” DZS Inc, May 31, 2022.)

DZS Inc’s CEO, Charles Vogt, estimates that there’s a $1.0-billion market opportunity when factoring in the 150 million connected homes between DZS and ASSIA and the opportunity to expand licensing software to enterprise customers with DZS Inc’s cloud-based “DZS Xtreme” platform.

This is the third major acquisition DZS Inc has made since the start of 2021. In the first quarter of 2021, DZS acquired two technology companies, Optelian Access Networks Corporation and RIFT.

The acquisitions are part of DZS Inc’s long-term plan to expand its portfolio, increase its gross margins, and create new opportunities in the Americas, Europe, Middle East, Africa, and Asia.

Chart courtesy of StockCharts.com

About DZSI Stock

DZS Inc is a provider of access, 5G transport, and enterprise communications platforms.

The company provides a range of networking technologies, including broadband access, Ethernet switching, mobile backhaul, passive optical local area network (LAN), and software-defined networks. (Source: “Investor Presentation (Nasdaq: DZSI): June 2022,” DZS Inc, last accessed June 14, 2022.)

Its solutions include products in the broadband connectivity; connected home and business; mobile and optical edge; and cloud software sectors.

DZS Inc’s list of clients is a who’s who of the tech world, including 30 of the top 50 global service providers. Five of its customers are AT&T Inc (NYSE:T), BCE Inc (NYSE:BCE), Lumen Technologies Inc (NYSE:LUMN), Telus Corporation (NYSE:TU), and Telefonica S.A. (NYSE:TEF).

DZS’s broadband technology business has lots of room to grow. That’s partly because many countries have banned Huawei Technologies Co., Ltd.‘s 5G technology over security concerns—and several other countries are also considering banning Huawei.

Q1 Backlog Up 129% Year-Over-Year

For the first quarter of 2022 (ended March 31), DZS reported orders of $101.0 million and revenue of $77.0 million, compared to first-quarter 2021 orders of $117.0 million and revenue of $81.0 million. (Source: “Q1 2022 Shareholder Report,” DZS Inc, last accessed June 14, 2022.)

The five-percent decrease in first-quarter revenue was a result of the spread of COVID-19 in late 2021 and early 2022, which disrupted the global supply chain. Temporary lockdowns in China that started at the end of March have shuttered shipping ports and negatively affected production by DZS Inc’s original development manufacturer partners.

DZS reported a first-quarter 2022 net loss of $3.0 million, or $0.11 per share, versus a first-quarter 2021 net loss of $23.2 million, or $0.92 per share. Its adjusted gross margin in the first quarter of 2022 was 35.2%, up from 35.0% in the first quarter of 2021.

As of March 31, 2022, the company’s backlog had increased by 129% year-over-year and eight percent sequentially to a record $243.0 million,

Analyst Take

The outlook for DZS Inc is solid. The broadband industry is experiencing its highest demand in history as communications providers invest in improving last-mile access and broadband service.

This trend is being fueled by increased network demand due to activities like telecommuting, remote learning, remote health care, video streaming, connected home devices, the metaverse, virtual reality, and e-sports.

While macroeconomic challenges persist, DZS Inc has completed the majority of its commercial pricing initiatives, which are expected to offset the increased semiconductor, component, and logistics costs the company incurred over the past nine to 12 months.

DZS Inc’s management said it believes its recent initiatives will keep the company on track to deliver its revenue and margin expansion objectives. That’s good news for DZS stock investors.