ADTRAN's Positive Pre-Earnings Validates Analyst's Surging US, European Fiber Build Theory

Needham analyst Ryan Koontz reiterated a Buy on ADTRAN Holdings, Inc ADTN with a $28 price target.
ADTRAN pre-announced upside 3Q22 results with revenue of $340.7 million, beating consensus by 3% and non-GAAP operating income of $20.9 million, ahead of the $16.9 million consensus.
Additionally, a non-GAAP gross margin of 38.1% was at the high end of the company's 3Q guidance, while a non-GAAP operating expense of $109 million was just above the high end of guidance.
Also Read: ADTRAN Shares Pop On Upbeat Preliminary Q3 Numbers
He guessed ADTN benefited from solid demand across crucial U.S. and European broadband segments, while its European metro optical acquired from Adva performed reasonably well against a challenging macro.
He anticipated a strong tailwind for ADTN's U.S. fiber access business and minimal setbacks to its European fiber access programs. In contrast, its more enterprise-centric metro optical business could begin to see a modest headwind from a challenging CY23 European macro.
In his view, supply chain pressures are alleviating, so the upside to the CY23 gross margin appears likely.
ADTN did not provide 4Q22 guidance in its announcement, but he suspected an in-line guide on its earnings call on November 8 could give more upside given the stock's valuation.
Price Action: ADTN shares traded higher by 12.19% at $21.67 on the last check Tuesday.

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