Harmonic (HLIT, $15.18) shares on Monday jumped 8.9% on active volume following a Jefferies upgrade to ‘Buy’ with a price target of $19. The firm is bullish on accelerating cable MSO demand for Harmonic’s CableOS software/cloud solution.
In 2022, Harmonic shares rose 11%. The stock is now sitting just below the 52-week high of $15.80 reached at the start of November.
Rising competition across broadband services is driving cable MSOs to invest more aggressively, which is good news for Harmonic. The company is primed to benefit from accelerated CapEx spending by cable MSOs, increased technology cohesion across the industry and a relatively benign competitive environment, says Jefferies.
The firm believes Harmonic can win Charter Communications as a key customer following news of the cable company’s build-out plans. Jefferies argues that the Charter business alone could make up much or most of the cable segment revenue growth that Harmonic investors are expecting over the next two years. Plus, a pending renegotiation with Comcast offers a chance to “significantly” boost CableOS economics, says Jefferies.
Last week, Northland named Harmonic a top communications technology pick for 2023, citing expectations for expanding deployments of next-generation cable network architectures by service providers worldwide. This expansion momentum positions Harmonic to reach its 2023 broadband revenue and earnings targets. Northland set a price target of $20.
Raymond James in November lifted its Harmonic price target to $18 from $13 after the company reported Q3 revenue rose 23% to $155.7 million, coming in above the consensus estimate of $152.3 million. Harmonic in Q3 saw a 60% rise in broadband segment revenue (representing 59% of total revenue) and 64% growth in video SaaS revenue. Quarterly bookings were up 50%.