On Tuesday, Jefferies issued a new rating for Harmonic Inc . (NASDAQ:HLIT) shares, downgrading the company from Buy to Hold, while also adjusting the price target to $12.50 from the previous $14.00. The adjustment follows Harmonic's third-quarter performance and its guidance for the full year.
The firm acknowledged Harmonic's strong third-quarter results and noted that the company's guidance for the year aligns with current expectations, even as projections for the fourth quarter increase. Despite these positive indicators, concerns have been raised regarding potential softness in the Broadband segment for the year 2025.
Jefferies has revised its stance on Harmonic due to the anticipated challenges in the Broadband segment, which is expected to face difficulties in the upcoming years. The new price target of $12.50 reflects this revised outlook, taking into account the factors that may impact the company's performance in the future.
Harmonic's current trajectory, with a solid third quarter and a steady outlook for the year, has been overshadowed by the longer-term expectations of segment softness. Jefferies' analysis suggests caution as Harmonic navigates through the forecasted industry headwinds.
The downgrade and new price target are based on Jefferies' latest evaluation of Harmonic's prospects, particularly focusing on the Broadband segment's anticipated downturn. The firm's statement concludes with a summary of their position: "We're reducing our rating to Hold. Our revised PT is $12.50."
In other recent news, Harmonic has reported robust growth and record Q3 results for 2024. The company's revenue for the third quarter surged by 54% year-over-year to $195.8 million, with the Broadband segment, driven by the strong demand for the cOS solution, contributing significantly to this performance.
Despite a slight year-over-year decrease, the Video segment showed resilience with a 10% sequential increase. Harmonic's adjusted EBITDA and earnings per share (EPS) exceeded expectations, standing at $43.4 million and $0.26 respectively.
These are recent developments that also highlight a backlog of $584.7 million and a book-to-bill ratio of 0.9 positioning the company for future growth. However, Harmonic anticipates challenges in 2025 related to the deployment of Unified DOCSIS 4.0 technology.
The company remains confident in its growth trajectory, especially in the Broadband sector, and reaffirmed its full-year 2024 Broadband revenue guidance. Despite this, Harmonic is cautious about providing specific revenue guidance for FY 2025 due to potential Unified deployment delays.
InvestingPro Insights
While Jefferies has downgraded Harmonic Inc. (NASDAQ:HLIT) to Hold, InvestingPro data offers additional context to the company's financial position. Despite concerns about potential softness in the Broadband segment, Harmonic's P/E ratio of 22.43 suggests it's trading at a low multiple relative to its near-term earnings growth, with a PEG ratio of just 0.19 for the last twelve months as of Q2 2024. This indicates that the market may not be fully pricing in the company's growth potential.
InvestingPro Tips highlight that Harmonic operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial flexibility as it navigates potential industry headwinds. Moreover, the company has seen a strong return over the last three months, with a price total return of 26.13% during this period.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Harmonic, providing a deeper understanding of the company's financial health and market position.
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