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Bull Of The Day: Harmonic (HLIT)

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Harmonic (HLIT - Free Report) is a Zacks Rank #1 (Strong Buy) with a good growth score and a weaker value score.  The style scores tell me right away what kind of stock I am looking at and value investors and growth investors are inherently looking for different things.  Let's look at why the stock hold the top Zacks Rank in this Bull of the Day article.

Description

Harmonic Inc. enables media companies and service providers to deliver ultra-high-quality broadcast and OTT video services to consumers globally.The company has also revolutionized cable access networking via the industry's first virtualized CCAP solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices. Whether simplifying OTT video delivery via innovative cloud and software-as-a-service (SaaS) technologies, or powering the delivery of gigabit internet cable services, Harmonic is changing the way media companies and service providers monetize live and VOD content on every screen.

Earnings History

I see a good earnings history with the company beating the Zacks Consensus Estimate in each of the last four quarters.  You want to see that because it shows that management knows what to tell Wall Street in order to set the bar low enough.

Estimates

So there was a negative move or two in estimates, but it was more than 60 days ago, so the Rank only sees the more recent bumps higher.  The current quarter is looking at a loss of 7 cents, down from a gain of a penny about 90 days ago.  The next quarter has seen a bump higher in estimates by a penny, moving to 3 cents from 2 cents.

The full year 2019 Zacks Consensus Estimate has risen from $0.00 to $0.02 over the last 30 days, and the 2020 number has increased 3 cents to $0.20.  That implies some really strong earnings growth for next year.

Valuation

The valuation on this stock is stiff.  A 292x forward earnings multiple is crazy high, but that is due to the low EPS number and stock price that is on the move higher in anticipation of higher earnings in the future.  The 2.3x price to book is much more reasonable.  I also like seeing the 1.3x sales number as it tells me that the market values their sales.

News Last Night

After the close HLIT announced that Comcast (CMCSA - Free Report) said they elected enterprise license pricing for its CableOS software.  As a result HLIT will see around $175M in software license fees over the next four year and about $50M of that coming in 2019. Comcast is also scouping up a lot of stock in HLIT, 7.8M shares from a warrant with a $4.76 exercise price.

In after hours the stock traded $6.50.

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