Dycom’s (DY) Post-Earnings Weakness Creates Attractive Entry Point, Says Canaccord


Shares of Dycom (NYSE:DY) got devastated after earnings today.

For the first fiscal quarter, analysts had been expecting the telecom infrastructure firm to report $735 million in revenues and $0.69 in EPS. However, Dycom failed to live up to expectations, reporting $731.4 million in revenues and $0.65 in EPS instead.

Adding fuel to the fire, Dycom reduced full year guidance from between $3.3 and $3.5 billion in revenues to a range of $3.2 and $3.4 billion, while lowering EPS guidance to between $4.26 and $5.15 from $5.22 to $6.14.

Given the disappointing earnings results we just saw, Dycom’s sell-off today appears justified. And yet, if you ask Canaccord analyst Robert Burleson, Dycom’s sell-off has the silver lining of providing new investors a much more attractive entry price into the stock. What’s more, Burleson thinks you should enter Dycom, reiterating a Buy rating and price target of $125, which represents a potential upside of 35% from where the stock is currently trading. (To watch Burleson’s track record, click here)

Burleson commented, “While management reduced guidance for fiscal 2019 (Jan) during today’s Q1 release and conference call, we expect the stock to recover given the majority of the guidance reduction was weighted to the first half, with a strong second half ramp implying a strong fiscal ’20. Customer spending plans remain robust to support new technologies including 5G and FirstNet in what we expect to be a decade-long investment cycle. We have lowered our C2018 estimates in conjunction with the updated guidance while continuing to forecast stronger growth and margin expansion for next year.”

“The reduced guidance reflects an update to timing of large customer project starts anticipated for this year. Despite the Q1 shortfall and reduced 2018 outlook we remain confident in accelerating top line growth for DY in light of customer spending on the rollout of enhanced technologies (including 5G and FirstNet) in conjunction with what is expected to be a decade-long investment cycle,” the analyst added.

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