VIAVI Solutions Inc: Tech Stock Up 40% in 2019, Has Additional Near-Term 70% Upside Potential

 VIAVI Solutions Inc: 70% Upside Potential Following Strong Q3 Financials
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VIAVI Solutions Inc Q3 Results Come in at High End of Guidance

Viavi Solutions Inc (NASDAQ:VIAV) was a great tech stock that got hammered during the fourth quarter marketwide sell-off; so much so that it tumbled into penny stock territory. But you can’t keep an excellent tech stock down.

Since the start of 2019, VIAVI’s share price has advanced 35%, due largely to the January effect coupled with strong second-quarter results and just-announced third-quarter results, which came in at the high end of guidance.

While VIAVI’s 40% gains in 2019 are impressive, easily outpacing the Nasdaq’s year-to-date gain of approximately 23.5%, the company has a lot more upside potential. Wall Street analysts are projecting a 2019 high for VIAVI Solutions of $16.00, which is just 16% from current levels; that seems too conservative.

Thanks to momentum in the technology sector, strong financial results, and solid full-year projection, VIAVI’s share price could climb an additional 70% from current levels, ending out 2019 at around $24.50 per share.

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VIAVI Solutions Overview

VIAVI Solutions is a communication equipment company that provides network testing, monitoring and assurance solutions, and optical technologies to communication service providers around the world. (Source: “About Us,” VIAVI Solutions Inc, last accessed May 3, 2019.)

The company’s business segments include Network and Service Enablement, and Optical Security and Performance. Of particular note, VIAVI Solutions is the first company with saleable test systems for validating 5G network performance.

Formerly known as JDS Uniphase Corporation, VIAVI’s customers come from virtually every industry and sector, including consumer electronics, anti-counterfeiting, industrial, aerospace, telecommunication, mobility and cable operators, chip and infrastructure vendors, agriculture, pharmaceuticals, government, and other markets.

VIAVI Solutions Inc Stock

VIAV Stock Information
Market Cap $3.1 billion
Beta 0.46
52-Week Change 40.4%
52-Week High $13.80
52-Week Low $9.17
Shares Outstanding 228.0 million
Float 226.6 million
50-Day Moving Average $12.65
200-Day Moving Average $11.44

(Source: “Viavi Solutions Inc. (VIAV),” Yahoo! Finance, last accessed May 3, 2019.)

Q4 Results Come in at the High End of Guidance

On May 2, VIAVI Solutions announced its financial results for the third quarter ended March 30, 2019.

Third-quarter revenue was $265.2 million, a 21.3% increase over the $218.7 million recorded in the same prior-year period. (Source: “VIAVI Announces Third Quarter Fiscal 2019 Results,” VIAVI Solutions Inc, May 2, 2019.)

The company reported a net loss of $0.02 per share, up $0.03 year-over-year. Non-generally accepted accounting (non-GAAP) earnings from continuing operations was $0.13 per share, flat year-over-year.

The company’s third-quarter numbers are at the high end of previous guidance, with third-quarter revenue projections of $247.0 million to $267.0 million and non-GAAP earnings per share to be $0.11 to $0.13.

VIAVI Solutions ended the third quarter with $537.5 million in total cash and investments and $573.5 million in long-term debt.

“Looking ahead into the rest of calendar 2019, we expect to see our typical seasonal demand profile re-enforced by the strength in consumer electronics benefiting OSP and continued strength in 5G Wireless and Fiber benefiting NSE,” said President and CEO Oleg Khaykin. (Source: Ibid.)

For the fourth quarter of fiscal 2019 ending June 29, 2019, VIAVI Solutions expects net revenue to be between $268.0 million to $288.0 million and non-GAAP earnings per share to be $0.14 to $0.16.

At the midpoint, that represents a 5.3% increase over Q4 2018 net revenue of $264.0 million. In the fourth quarter of 2018, VIAVI reported non-GAAP earnings per share of $0.14.

Analyst Take

VIAVI Solutions has been rewarding investors with strong financial results and stock market gains. Its third-quarter results came in at the high end of guidance and it provided solid guidance for the fourth quarter.

VIAVI Solutions continues to have great momentum and tremendous upside potential, which should help it notch up additional record highs in the coming quarters.