On Monday, Stifel changed its stance on Viavi Solutions (NASDAQ:VIAV), upgrading the stock from Hold to Buy and raising the price target to $13.00 from the previous $10.00. The firm believes that the company has overcome its toughest challenges and is on a path to recovery following a difficult calendar year 2023, which saw a 19% year-over-year decline in top-line revenue and a 55% contraction in non-GAAP EPS.
Despite a rocky start to the year, with shares down 12% year-to-date, mostly due to the decline after the fiscal second quarter 2024 earnings report in December, analysts at Stifel anticipate a modest revenue recovery in calendar year 2024. They expect earnings to accelerate at a significantly faster rate as revenue normalizes.
Viavi Solutions' performance in 2023 was notably weak, with its shares falling by 4%, a significant underperformance compared to the broader technology sector. The firm suggests that the current stock price already reflects much of the negative sentiment and that Viavi Solutions is poised for a turnaround.
Looking forward, Stifel highlights Viavi Solutions' potential involvement in the expanding use of artificial intelligence (AI). As high-speed interconnect technologies gain momentum and testing requirements grow more complex, the firm expects Viavi Solutions to play a role in the broader AI theme, contributing to the company's growth prospects.
InvestingPro Insights
Following Stifel's upgrade of Viavi Solutions (NASDAQ:VIAV), a closer look at the company's financial data through InvestingPro reveals a mixed financial landscape. With a market capitalization of $1.98 billion and a strikingly high P/E ratio of 406.82, Viavi's valuation appears to be steep relative to its earnings. This is further underscored by an adjusted P/E ratio for the last twelve months, as of Q2 2024, which stands at -577.81, suggesting that investors are pricing in future growth despite recent declines in earnings.
InvestingPro Data indicates that revenue has seen a significant downturn, with an 18.6% decrease in the last twelve months as of Q2 2024. This contraction is in line with Stifel's acknowledgment of a challenging calendar year 2023 for Viavi, which saw a 19% year-over-year decline in top-line revenue. However, an InvestingPro Tip suggests that net income is expected to grow this year, which could be the silver lining that Stifel is banking on for the company's recovery.
Despite the revenue challenges, InvestingPro Tips highlight that Viavi is anticipated to be profitable this year, and it has been profitable over the last twelve months. This profitability, coupled with the fact that the company's liquid assets exceed its short-term obligations, provides a foundation for financial stability as it navigates through a period of recovery. Investors should note that analysts have revised their earnings downwards for the upcoming period, which could temper expectations for an immediate earnings acceleration.
For those interested in a deeper dive into Viavi Solutions' financial health and future prospects, InvestingPro offers additional insights. With a total of 9 InvestingPro Tips available, users can gain a comprehensive understanding of the company's current standing and future potential. To access these insights, visit InvestingPro's VIAV page. Moreover, readers can take advantage of an exclusive offer by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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