Jefferies sees opportunities in Calix, Harmonic after assessing inventories

Jefferies assessed each of the firm’s covered Communications Infrastructure companies for excess customer inventory risk in the wake of a normalizing supply chain and reduced product lead times given that recent Q1 earnings season featured rising investor concerns about excess inventory corrections among equipment vendors. Look at its coverage group, the firm said the “names that stood out as outliers” were Infinera (INFN), where it believes the risk of an inventory correction is “significant,” as well as Adtran (ADTN), Ciena (CIEN), CommScope (COMM), Corning (GLW) and Juniper (JNPR). On the other side, Jefferies sees “interesting opportunities” in Calix (CALX) and Harmonic (HLIT) along with at Corning, “albeit less so.” Corning’s Optical Communications segment is going through a significant inventory correction, but this could be “a severe – yet fast-moving – inventory correction,” the firm explained. Calix is the lowest-risk company in the sector when it comes to customer inventory correction risk, added the analyst, who rates Corning shares a Hold, and Calix and Harmonic as Buys.