Viavi Solutions (VIAV) provides network test, monitoring and assurance solutions across the globe to communications service providers, enterprises, network equipment manufacturers, governments and avionics.
Recently, Viavi’s Q4 numbers surpassed estimates on both top-line and bottom-line fronts. The stock has climbed 23% over the past 12 months. In this backdrop, let us take a look at the financial performance of the company and understand what has changed in its key risk factors that investors should know.
Boosted by growth in Network Enablement and Optical Security and Performance Products segments, its Q4 revenue increased 16.6% year-over-year to $310.9 million, outperforming consensus by $10.1 million.
The President and CEO of Viavi, Oleg Khaykin, said, “NSE’s 13.5% year-on-year growth and record revenue was driven by the continued market rebound and strong demand for Fiber and Wireless products. OSP revenue was in line with our guidance, up 27.8% from a year ago levels reflecting continued strength in Anti-Counterfeiting.”
Earnings per share of $0.22 rose by $0.04 over the previous year and beat the Street’s estimates by $0.03. (See Viavi Solutions stock chart on TipRanks)
For Q1 2022, Viavi estimates revenue to be in the range of $303 million to $317 million. It sees earnings per share landing between $0.20 and $0.22.
Khaykin remarked, “We expect Fiscal Year 2022 to be a strong year for VIAVI with 5G deployment and Fiber network upgrades driving NSE revenues and OSP benefiting from the continued strong demand for Anti-Counterfeiting and 3D Sensing products. Overall, we expect Fiscal Year 2022 to achieve higher levels of revenue and non-GAAP profitability.”
On August 16, Needham analyst Alex Henderson reiterated a Buy rating on the stock with a price target of $19.
Henderson said, “As 5G deployment gradually nears, investors’ desire for ways to invest in this major theme should keep VIAV shares in the headlights. While VIAV shares are not inexpensive, we think the conservative guidance, solid growth potential, improving Gross and Operating Margins, solid Cash flow, and strong management will provide upside.”
Consensus on the Street is a Moderate Buy based on 4 Buys and 2 Holds. The average Viavi price target of $20.20 implies 24.4% upside potential.
Now, let’s look at what has changed in the company’s key risk factors.
According to the new Tipranks’ Risk Factors tool, Viavi’s main risk category is Finance & Corporate, which accounts for 45% of the total 31 risks identified. Since July, the company has added four key risk factors.
The first three of these new risks are under the Finance & Corporate category. Highlighting the first risk, the company states that the present global economic conditions have caused, and may cause, volatility and disruptions in the capital and credit markets. A deterioration in the markets may limit Viavi’s ability to take on additional debt or refinance maturing obligations as they become due.
Addressing its second risk, Viavi states that its LIBOR-based borrowings extending beyond June 2023 will need to be converted to a replacement rate, as LIBOR tenors will no longer be available after June 2023. At present, it is not possible to gauge the magnitude of LIBOR’s end on Viavi’s borrowing costs as there is uncertainty as to which rates will replace LIBOR.
The company further acknowledges that if it is unable to attract and retain qualified executives and employees, or successfully integrate new hires, into the organization then Viavi may not be able to achieve operating objectives, which may adversely impact its financial performance and results of operations.
Under the Ability to Sell risk category, Viavi notes that a significant portion of its sales comes from a limited number of customers. This increases pressure on its pricing and contract terms. Losing a major customer, or a significant reduction in orders from a major customer, may impact Viavi adversely.
The Finance & Corporate risk factor’s sector average is at 39%, compared to Viavi’s 45%.
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