TD Newcrest Downgrades EXFO Inc. (EXFO) to Hold; Q4 in Line; Q1 Guidance Misses and FY12 Targets Look Heady

TD Newcrest downgraded EXFO Inc. (NASDAQ: EXFO) from Buy to Hold, price target cut from $10 to $7.

TD analyst says, "Q1 revenue guidance of $65-$70mm missed expectations (consensus $72.0mm) as did earnings guidance. We now see revenue flattish y/y for both Q1 and Q2 (against tough comparables), not ideal for a high-growth name. A linchpin of our investment thesis remains that EXFO is well-positioned to capitalize on growth opportunities, notably in the wireless space as LTE service is rolled out. We see a higher software revenue component boosting gross margin, but this did not play out in Q4 despite a large ($1mm+) service assurance deal. We now model 10% revenue growth in F2012 (consensus 13%), which is a far cry from the target implied in EXFO’s three-year plan of 23-24%. Valuation is arguably attractive at 8x LTM EBITDA, but this is in line with key peers Agilent (NYSE: A) and JDS Uniphase (Nasdaq: JDSU)."

For more ratings news on EXFO Inc. click here and for the rating history of EXFO Inc. click here.

Shares of EXFO Inc. closed at $6.01 yesterday.

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