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| Nikos: Calix is a Buy |
| Saturday, 22 May 2010 09:09 |
Nikos Theodosopoulus, top wall street analyst, initiated Calix with a buy rating because he expects "exciting growth, levered to the broadband stimulus." They will "grow in excess of the market on share gain." Calix's boxes can do GPON, DSL and point to point Ethernet fiber, attractive for wireless backhaul. Carriers big and small welcome the flexibility to add a board and meet unforeseen customer needs. Nikos predicts a 20-30% increase in sales that will result in a reversal of losses. Because so little of the stimulus money is going for actual broadband deployment, I've been skeptical about the effect on equipment makers, but Calix is focused on the smaller U.S. carriers and Nikos' numbers look promising.
Calix is exceptionally exposed to 38% customer CenturyLink, as Nikos notes.
I believe Adtran in the dominant supplier in Qwest territory and will fight hard to win all the business after Century and Qwest merge. CenturyLink/Qwest will be almost Verizon-sized in local phone business meaning Alcatel and Huawei are likely to come in with attractive bids. Calix could gain a great deal of business in Qwest territory, potentially a big upside. They also could lose most sales to their largest customer.
Qwest is highly likely to get approved for a stimulus grant which would represent $20-50M of equipment. They've promised to move quickly if they get the money in November so will probably stay with their current suppliers. The total Qwest requested is sensible with the remote territory they promise to reach, although they've refused to allow me to see the actual application.
The stock is down almost 30% since the IPO in March, which may be a buying opportunity. Reviewing the 10Q I see revenue of $48M under current accounting rules, which a lengthy explanation of how that would have been lower under earlier accounting rules. |
| Last Updated on Thursday, 27 May 2010 15:33 |