Harmonic stock ( NASDAQ: HLIT ) is 8.7% higher in the wake of an upgrade to Buy at Jefferies, based on a sunny outlook for the company's CableOS offering and what the firm sees as a likely upcoming customer win at Charter Communications.
Harmonic operates in Video and Cable Access segments, and it's the latter where its CableOS software/cloud solution appeals to cable operators.
Analyst George Notter says that side of the business is "primed to benefit from: (1) accelerating Cable MSO capex spending; (2) increased technology/standards cohesion across the industry; (3) and a relatively benign competitive environment."
Rising competitive intensity in broadband services is pushing cable multiple-system operators to invest more aggressively, he notes (with Charter's buildout plans the most recent example ).
Meanwhile, the competitive situation in Harmonic's virtualized cable modem termination system space has crumbled a bit, with Cisco ( CSCO ) effectively exiting the market and Harmonic sporting a significant lead on players including CommScope ( COMM ) and Casa Systems ( CASA ).
As for Charter ( CHTR ), a win for Harmonic there now seems "much more of a certainty" following news of the cableco's building plans, Notter said. And a pending renegotiation with Comcast ( CMCSA ) offers a chance to "significantly" boost its CableOS economics.
The Charter business alone could make up much or most of the Cable segment revenue growth that Harmonic investors are expecting in the next two years, Notter said.
He's boosted his price target to $19, still implying another 26% upside beyond Monday's gains.
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Harmonic gains 9% as Jefferies boosts to Buy on cable market outlook