Calix, Inc. (CALX) reported Q1/2024 results that met management’s guidance but fell short of analyst expectations. Revenue and profitability declined year-over-year and sequentially, but gross margins reached new highs. Despite strong free cash flow generation, the company’s Q2 guidance missed consensus estimates for the second consecutive quarter.
The company’s appliance business faced challenges in Q1 due to customer indecision on government funding sources, shortened lead times, and spending plan adjustments. Management previously anticipated Q1 to mark the low point for the year, with revenue growth expected thereafter. However, the recent stockholder letter did not provide a clear outlook for the remainder of 2024.
Revenue from medium-sized and large customers declined significantly in Q1. The decrease was primarily due to purchase delays by several significant customers. The company expects this pattern to continue in the second half of the year.
Analysts are likely to reduce their estimates across the board due to the company’s guidance miss and ongoing headwinds. The stock’s valuation is viewed as rich, given the potential for continued challenges and delays in government funding. Therefore, it is recommended to avoid buying the stock at this time.
