MKM Partners Remains Bullish on Viavi Solutions (VIAV) Following Analyst Day; Says Management is 'Very Strong'
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MKM Partners reiterated a Buy rating and $8.50 price target on Viavi Solutions (NASDAQ: VIAV) following the company's analyst day. Despite minor disappointments at the event, MKM believes that new management is very strong and is doing all the right things to make the company sustainably much more profitable.
Analyst Michael Genovese commented, "We are reiterating our Buy rating and $8.50 price target despite minor disappointment at the Viavi Analyst Day. We are lowering FY17 estimates, and reducing FY18 revenues significantly and FY18 EPS marginally. Nevertheless, we think new management is very strong and is doing all the right things to make the company sustainably much more profitable. Our revenue forecasts are lower because 1) There is some 2HCY16 demand weakness in NE; 2) SE sales are permanently headed lower as VIAV pursues a "focused SE" strategy; 3) OSP is facing an inventory correction in 2HCY16 for anti-counterfeit pigments; and 4) A large new smartphone opportunity for 3D sensors that should hit in a year is not yet in the model. The most encouraging part of the Analyst Day was the guidance to increase OMs to 17%-19% in FY19 from under 13% in FY16, even on an organic revenue base with a negative CAGR."
Shares of Viavi Solutions closed at $7.47 yesterday.
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