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Bull Of The Day: Calix (CALX)

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The world is more digitally connected today than ever before, with the global pandemic putting the world online. The economic shift from the office to home is one that will outlive COVID lockdowns, as a hybrid work structure becomes ubiquitous in post-COVID's 'new normal.' 

Our increasingly mobile society is driving our transition to a cloud-based economy. Calix (CALX - Free Report) is poised to soar from the mobile economic shift, and the 5G revolution is adding fuel to the fire.

This under-the-radar stock is already up over 200% for the year, but analysts across the board still have high hopes for CALX's further appreciation. These shares are currently trading below the most conservative price targets and have over 20% to go before hitting the average target price. Analysts are increasingly optimistic about Calix's future, raising their EPS estimates and propelling its shares into a Zacks Rank #1 (Strong Buy). 

The Business

Calix's mission is to connect everyone and everything thing.

Calix is an innovative cloud-driven enterprise that provides the leading "platforms, systems, and services required to deliver the unified access network and smart premises of tomorrow." The company helps facilitate smooth network functionality in increasingly complex infrastructures

Communication infrastructures are being forced to handle increased demand from a progressively mobile population. Calix products are becoming essential as the 4th industrial revolution and the Roaring 20s kick-off.

Calix has a broad range of access service solution platforms and is the #1 telecommunications vendor focused exclusively on the access space. Its Unified Access portfolio allows its customers to seamlessly connect their subscribers over any network infrastructure.

The enterprise's essential network software is trusted by service providers of every size and type, spanning across 85 countries. Verizon (VZ - Free Report) , one of the world's largest communication technology enterprises, depends on Calix's innovative technology for effective service deployment.

Verizon's VP of technology, Lee Hicks, said, "Innovative partners like Calix are enabling us to leapfrog the competition and consolidate multiple network elements into one platform and automate many of our most critical network functions."

Calix has a massive and growing total addressable market (TAM), with any entity providing communication services to a subscriber being apart of its scope. The 5G revolution will provide Calix with an enormous tailwind as the number of internet of thing (IoT) devices, autonomous vehicles, and mobile devices proliferate across the globe.

Financials

2020 has been a banner year for Calix as its value soared from a nearly micro-cap stock (<$300M) in mid-March to a mid-cap stock ($1-10B) with large-cap (>$10B) aspirations today.

Internet service providers worldwide are turning to Calix's innovative solution software to manage their subscriber access. Demand is evident in its income statements, which have illustrated accelerating year-over-year sales growth for 5 consecutive quarters.

Calix released its Q3 earnings last month and blew the Street's expectations out of the water. On top of the incredible quarterly results, the management provided a much healthier outlook than analysts initially estimated. The base bar for Calix has been raised, and analysts are finally taking notice while investors are acting on the opportunity.  

The need for mobile connectivity has driven Calix's bottom-line into robust profitability. This enterprise is on its way to notching 2020 as its first profitable year as a public company.

Calix has more than $100 million in cash & equivalents on the balance sheet with swelling cash-flows, which give the business financial flexibility for organic innovation and synergy driving external acquisition.   

Despite CALX's massive 2020 rally, the stock still trades at a reasonable price-to-forward sales (P/S) ratio of 2.6x. This nearly halves the broader telecom equipment market's average P/S of 4.6x.

Final Thoughts

We are living in a world driven by digital connectivity. The necessity of accessing the internet anywhere has never been greater. Calix is working to help facilitate the connected mobility of the 'new normal.'

Calix is a market leader in a niche but essential space with demand just beginning to accelerate as the 5G revolution commences. 

The stock remains somewhat under the institutional radar, but 4 out of the 4 analysts I follow are calling CALX a buy today.

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