Shares of Adtran (ADTN) have performed very well over the past 52 weeks, gaining more than 77%.
The upsurge has not run out yet, as the stock has built up strong catalysts that have the potential to send the share price even higher. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks)
Based in Huntsville, Alabama, Adtran offers communication equipment aimed at making things easier for global providers of communication services to upgrade existing infrastructures, or create a more advanced framework.
Currently, Adtran’s solutions are designed for both cable and telecommunication operators of rural or urban areas, serving businesses and homes. The company serves clients that operate either on domestic infrastructures, or global infrastructures.
Q2 2021
Thanks to the strong demand for fiber access network solutions, total revenue improved 11.3% year-over-year to $143.2 million.
The company beat analysts who projected total revenue of $141.8 million.
On a non-GAAP basis, earnings were $0.16 per share, compared to $0.04 for the prior year’s quarter. Adtran beat analysts on GAAP-EPS by $0.04.
Furthermore, the operating cash flow increased almost 350% year over year to $7.5 million in the second quarter, of which $4.4 million was allocated to the payment of dividends.
As of June 30, 2021, the balance sheet looked solid with $72.8 million in cash on hand and short-term investments and no borrowings, as the company refunded bonds worth $24.6 million last year.
Global Outlook
With its solutions, Adtran favors the adoption of networking infrastructures where anchoring cutting-edge platforms. These are used by companies that want to increase the efficiency of their operations and achieve higher margins, thus benefiting from the advantages of the globalized world.
Therefore, there is interest in increasing the share of investments over time to allocate to the development of communication infrastructures.
Adtran is well-positioned. On Aug. 30, Adtran inked an all-stock transaction agreement with ADVA (ADVOF), a German global provider of optical and Ethernet-based networking solutions, with the scope of creating a leader in the global market of fiber networking.
The closing should happen between the second and the third quarter in 2022. The new business entity is expected to reach an annual turnover of no less than $1.2 billion, which will refer to a stock that will be listed on the NASDAQ and the Frankfurt stock exchanges.
Last month, Adtran announced its support to a local provider in Cornwall, United Kingdom, to build up a broadband connection enabling communities of the popular vacation destination in the U.K. and its businesses to browse the Internet extremely fast.
Wall Street’s Take
In the past three months, three Wall Street analysts have issued a 12-month price target for ADTN. The average Adtran price target is $26.17, implying 39.9% upside. The analyst rating consensus is a Moderate Buy rating, based on two Buy ratings and one Hold rating.
Summary
Adtran is well-positioned, as it offers technological solutions that are in line with the needs of a world that will become more and more global.
The company targets to become a global leader in the fiber networking market. Potentially, this may unfold an unbelievable growth opportunity for shareholders.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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