Viavi Analyst Chooses To Be On Sidelines As Analyst Day Lacks Surprises

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  • Alex Henderson from Needham maintained a Hold rating on Viavi Solutions Inc VIAV.
  • Viavi reiterated its FY1Q/CY3Q guidance and offered initial guidance for FY23 with Revenue of $1.265 billion - $1.335 billion and EPS of $0.90-$1.00 versus $0.95 in FY22 and consistent with the Street's Revenue estimate of $1.297 billion -$1.328 billion and EPS estimate of $0.90-$1.00 and mean of $0.96 amid a challenging economy. 
  • Longer-term, Viavi expects to deliver 5% Revenue, 10% EPS, and 15% Cash Flow from Operations growth. 
  • After a flat first year, this implies acceleration to 7%-8% Revenue growth in the two-year out period. 
  • Based on the $0.95 start base, Viavi offered an FY25 EPS target of $1.20-$1.30, modestly above the implied Street estimate of $1.10-$1.15 based on 10%-15% growth off the FY24 published estimates.
  • He found it a relatively well-balanced and generally upbeat analyst day that was broadly in line with expectations.
  • Viavi is well positioned for the gradual rollout of 5G, as he sees it, but the macro conditions could slow the process and keep growth relatively modest. 
  • Viavi management has exhibited strategic wisdom, operational excellence, and the ability to find and execute accretive acquisitions. 
  • He thinks Viavi has solid growth opportunities in 3D Sensing, T&M, and a superb Cash Cow in OSP.
  • However, high exposure to international markets, particularly EMEA, leads him to decrease estimates. 
  • VIAV shares are not inexpensive, and he prefers to be on the sidelines.
  • Price Action: VIAV shares traded higher by 0.39% at $14.195 on the last check Wednesday.
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