Harmonic (HLIT) Stock Forecast & Price Target

Harmonic Inc. has demonstrated strong performance, with a notable Next Generation Gross Margin (NGGM) of 54.4%, indicating a year-over-year increase of 70 basis points and a quarter-over-quarter increase of 30 basis points, primarily attributed to a favorable product mix of higher margin broadband offerings. The company is expected to achieve steady operating margin expansion, supported by top-line growth, modest gross margin improvements, and operational efficiencies resulting from an increasing number of contract wins with cable operators for its cOS software and hardware solutions. Furthermore, with telcos and alternative operators investing significantly in fiber-to-the-home (FTTH) infrastructure to meet rising broadband demand, and a promising outlook for future revenue growth, Harmonic is well-positioned for continued financial success, as evidenced by its recent revenue and earnings per share beats.

Harmonic Inc. reported a significant decline in non-Comcast revenue, down 15% year-over-year to $81 million, largely attributed to challenges with Charter Communications, indicating potential weaknesses in its competitive position. The company's guidance for 4Q Broadband revenue was lowered to $90 million, representing an 8% miss against consensus and reflecting a decline in hardware sales amid a transition period, further compounding concerns about growth sustainability. Additionally, the Video segment continues to face pressures as it shifts from hardware to software/SaaS, with a 4Q revenue forecast of $50 million, which is below the consensus estimate, suggesting a lack of strong momentum in Harmonic's core areas of business.