VIAVI Solutions Inc: Record Q2 Results Launch This Tech Stock Out of Penny-Stock Territory

VIAVI Solutions Stock: Record Q2 Results
iStock.com/marchmeena29

VIAVI Solutions Inc: One-Time Penny Stock a Big Winner in 2019

Back in December 2018, I wrote an article on tech penny stocks that could soar in 2019. Since then, all three of those stocks have soared. One of them, VIAVI Solutions Inc (NASDAQ:VIAV), has been so bullish in 2019 that it can no longer even be categorized as a penny stock.

For the sake of inflation, any equity trading under $10.00 can be classified as a penny stock.

Thanks to momentum in the broader technology sector and record second-quarter results, VIAVI Solutions Inc’s share price is up approximately 25% since the start of 2019. Despite the strong gain, this communications equipment manufacturer has plenty of room to run in 2019.

VIAVI Solutions Overview

VIAVI Solutions is a global leader in network testing, monitoring and assurance solutions, and optical technologies. (Source: “About Us,” VIAVI Solutions Inc, last accessed February 15, 2019.)

Advertisement

The company’s “Network and Services Enablement” (NSE) division develops fiber optic and test measurement technology that helps deliver fiber-intensive 5G networks. VIAVI Solutions is the first-to-market company with scalable test systems for validating 5G network performance.

VIAVI’s network and services customers include communications service providers, cloud providers, data centers, network equipment manufacturers, network installers, aerospace companies, military, and government.

The company’s “Optical Security and Performance” (OSP) division designs and manufactures optical (light) products. This includes everything from specialty filters used in the aerospace industry to custom colors for paints, inks, and textiles. Among other things, its inks are used to help protect currencies from being counterfeited.

VIAVI’s optical security customers come from many different sectors, including consumer electronics, anti-counterfeiting, industrial, aerospace, and government. (Source: Ibid.)

VIAV Stock Information
Market Cap $2.8 billion
Beta 0.27
52-Week Change 21.45%
52-Week High $12.82
52-Week Low $9.11
Shares Outstanding 228 million
Float 226.6 million
50-Day Moving Average $10.76
200-Day Moving Average $10.86

(Source: “Viavi Solutions Inc. (VIAV),” Yahoo! Finance, last accessed February 15, 2019.)

The San Jose, California-based tech company’s share price was quite bullish in 2018, rising 46% from $8.78 at the start of January to a high of $12.82 on October 3.

That momentum hit a brick wall, though. The company’s share price tumbled in October, during the broader market sell-off. VIAVI’s share price faced additional headwinds during the December meltdown.


Chart courtesy of StockCharts.com

It was that December meltdown that sent VIAVI Solutions into penny-stock territory. But it was only a matter of time before the company’s share price would rebound.

After all, in early November, the company reported solid results for the first quarter of its fiscal-year 2019 (ended September 29, 2018). Nothing materially happened to the company or was announced to justify the sell-off. VIAVI Solutions Inc was a great company before the markets turned on it in the last quarter of the year.

And sure enough, after the worst December to hit Wall Street since the Great Depression and a year that saw tech stocks end their nine-year winning streak, VIAVI’s share price came roaring back.

Since the start of January 2019, VIAVI’s share price has been advancing and is closing in on a resistance level near $12.75. Will it break through and hit a new 52-week high? The future looks bright for VIAVI shareholders.

VIAVI’s 50-day moving average is on the verge of crossing over its 200-day moving average. This is a bullish indicator called a golden crossover, and it usually predicts a breakout to the upside.

The company’s share price has been in an upward trend since the start of 2019, so it certainly wouldn’t be a total surprise to see the upward momentum continue. The company’s strong second-quarter results and investor optimism should help continue fueling that move.

VIAVI Solutions Announces Strongest Quarterly Results Ever

On February 5, VIAVI Solutions announced strong results for the second quarter of 2019 (ended December 29, 2018). Second-quarter revenue came in at $306.9 million, a 49.4% increase over the $205.4 million recorded in the same prior-year period, and a sequential increase of 14.3%.(Source: “VIAVI Solutions Announces Second Quarter Fiscal 2019 Results,” VIAVI Solutions Inc, February 5, 2019.)

Second-quarter 2019 net income was $15.4 million, or $0.07 per share. This compares to a second-quarter 2018 loss of $1.1 million, or break-even per share.

Non-generally accepted accounting principles (GAAP) net income was $50.9 million, or $0.22 per share. In the second quarter of the prior fiscal year, VIAVI Solutions reported non-GAAP income of $22.8 million, or $0.10 per share.

“VIAVI delivered its strongest financial performance quarter with record revenue, non-GAAP operating margin and non-GAAP EPS in fiscal Q2,” said VIAVI President and CEO Oleg Khaykin.

He added, “Both NSE and OSP business segments exceeded our expectations, driven by strong year-end demand for our core product lines, a recovery in North American service provider spend and greater than expected demand in our key growth areas of 5G wireless and Fiber.”(Source: Ibid.)

Looking ahead, Khaykin said he expects to see a typical seasonal decline in sales from North American service providers and consumer electronics customers.

Seasonality aside, management said, “we expect continued strong performance in our key growth areas of 5G Wireless, 3D Sensing and Fiber throughout the calendar year 2019.” (Source: Ibid.)

Analyst Take

VIAVI Solutions Inc may not be a household name, but unlike many of the bigger and better-known tech stocks, it has been rewarding investors with strong double-digit gains.

VIAVI Solutions continues to report strong quarterly financial results and an encouraging outlook for the remainder of fiscal-year 2019. If things work out like management believes they will, there will be no reason to believe that the company’s momentum will not continue into fiscal-year 2020.