Why Harmonic (HLIT) Stock Is Plunging Today

NEW YORK (TheStreet) -- Shares of Harmonic Inc.  (HLIT) are falling -10.62% to $6.37 after it issued downside guidance for the second quarter ending in June, and said it sees earnings per share of zero cents to two cents, below the Capital IQ consensus of 6 cents.

Revenue for the second quarter was lowered to $108 million to $110 million from previous guidance of $113 million to $123 million.

Plus, Harmonic issued downside guidance for the upcoming third quarter ending in September, with revenue of $103 million versus $113 million, versus the Capital IQ consensus of $124.8 million.

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Harmonic cited a global slowdown in its video business and was slated to report second quarter results July 22nd.

Separately, TheStreet Ratings team rates HARMONIC INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate HARMONIC INC (HLIT) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HLIT's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HLIT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.64, which clearly demonstrates the ability to cover short-term cash needs.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Communications Equipment industry and the overall market, HARMONIC INC's return on equity is below that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 184.3% when compared to the same quarter one year ago, falling from $6.42 million to -$5.41 million.
  • You can view the full analysis from the report here: HLIT Ratings Report
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