Dmitry Netis Continues to be Constructive on Acacia Communications, Inc. (ACIA) Despite Weak 1Q Outlook

Did an iceberg just wallop into Acacia Communications, Inc. (NASDAQ:ACIA) stock? This networking component maker’s shares are plunging at breakneck speed of almost 18%. The real reason? Acacia posted mixed Q4 results and set Q1 guidance below Street estimates.

Specifically, the company reported mixed fourth-quarter results with revenue of $86.6 million, which missed consensus by $1.8 million, while EPS of $0.27 beat by $0.02. In addition, Acacia offered first-quarter revenue and EPS guidance below the Street by $23 million and $0.23,

However, William Blair analyst Dmitry Netis says he remains a buyer of Acacia stock on what he called, “reset.” As such, the analyst reiterates an Outperform rating on ACIA, without providing a price target. (To watch Netis’ track record, click here)

Netis wrote, “We remain buyers on reset, expecting improving conditions beginning with the June quarter. Management is exercising extra caution until it begins to see an improvement in order rates from China. Nonetheless, management points out that a handful of its Chinese customers expect orders to grow throughout 2018 with long-term fundamentals in China intact driven by the need to add bandwidth to provincial and metro networks in support of 5G and fiber-to-thehome services.”

“We lower our 2018 revenue estimate by $54.5 million, to $360.5 million (6.4% decline); EPS go down by $0.58, to $0.78. Earnings remain subdued due to increased operating expenses (up 19% in 2018) on significantly lower revenue volumes. For 2019, our revenue estimate goes down by $85 million, to $430 million (19% growth), and EPS are down by $0.61, to $1.37. Despite the near-term uncertainty, we see an asymmetric risk/reward for Acacia based on our expectation for a return to sequential top-line growth beginning in the June quarter, continued share gains, and technology differentiation,” the analyst continued.

Out of the 10 analysts polled by TipRanks (in the past 12 months), 8 rate Acacia Communications Inc stock a Buy, while 4 rate the stock a Hold. With a return potential of 37.8%, the stock’s consensus target price stands at $47.13.

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