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

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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