Market Overview

Loop Capital: Cable, Video Segments Are 2 Reasons To Like Harmonic

Loop Capital: Cable, Video Segments Are 2 Reasons To Like Harmonic

The bullish case for video delivery tech company Harmonic Inc (NASDAQ: HLIT) is based on expectations for growth in its two business segments, according to Loop Capital Markets.

The Analyst

Analyst James Kisner initiated coverage of Harmonic with a Buy rating and $8.25 price target.

The Thesis

Harmonic's video segment accounts for around 80 percent of total sales and helps companies manipulate and deliver video content to subscribers, Kisner said in the initiation note. (See his track record here.) 

The industry has moved away from using application-specific integrated circuits and pivoted to software-based solutions that leverage commodity servers, the analyst said. To address the shift in video delivery, Harmonics started introducing software-based solutions, including a SaaS business model, he said. 

While the transition has resulted in declines in the video segment, as revenue from SaaS bookings is recognized over a longer time period vs. traditional hardware-based products, Kisner said. Yet the segment is poised to recover, as higher sales of video products to OTT providers will contribute to a base of recurring SaaS revenue, he said. 

Harmonic's smaller cable edge business segment helps cable operators deliver high-speed internet services in addition to video content, the analyst said. Harmonics was successful in developing a software-based platform that leverages commodity x86 servers instead of purpose-built network equipment, which better addresses the need for service providers to adopt virtual solutions, he said. 

Encouragingly, the largest cable operator in the world, Comcast Corporation (NASDAQ: CMCSA), is a major Harmonics client, and the company also said it reached a new, multiyear supply agreement worth over $50 million with an unnamed Tier 1 international cable operator.

Loop's $8.25 price target is based on a 20 times multiple on estimated 2020 EPS, which is an appropriate valuation given the company's strong earnings growth prospects, Kisner said.

Price Action

Shares of Harmonic were trading higher by nearly 6 percent early Friday morning.

Related Links:

Benzinga's Top Upgrades, Downgrades For September 21, 2018

Buy The Dip In News Corp, Loop Capital Says In Upgrade 

Latest Ratings for HLIT

Jul 2019MaintainsOutperform
Jun 2019UpgradesMarket PerformOutperform
Feb 2019Initiates Coverage OnBuy

View More Analyst Ratings for HLIT
View the Latest Analyst Ratings

Posted-In: James Kisner Loop Capital Markets SAAS streaming videoAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga


Related Articles (CMCSA + HLIT)

View Comments and Join the Discussion!

Latest Ratings

TOLGoldman SachsInitiates Coverage On42.0
KBHGoldman SachsInitiates Coverage On36.0
YEXTSunTrust Robinson HumphreyMaintains28.0
LHCGSunTrust Robinson HumphreyMaintains160.0
DLRSunTrust Robinson HumphreyMaintains140.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

Acadia's FDA Boost Is Just The Beginning, Piper Jaffray Says In Upgrade

JPMorgan Sheds Bearish Under Armour Stance As Retailer's Turnaround Continues