Calix(NYSE: CALX) stock is sinking Tuesday. The telecom software specialist's share price was down by 21.7% as of 12:30 p.m. ET, according to data from S&P Global Market Intelligence.
After the market closed Monday, Calix published its third-quarter results, with sales and earnings that came in ahead of the market's expectations. However, it appears that the market was disappointed with the company's guidance. An announcement from a competitor may also be factoring into Tuesday's sell-off.
What's driving Calix stock's big sell-off?
Calix recorded non-GAAP (adjusted) earnings per share of $0.45 on revenue of roughly $263.8 million, topping analysts' consensus estimates, which had called for earnings per share of $0.36 on sales of roughly $261.5 million. Sales were up 11.7% year over year, and earnings were up roughly 32%.
For the fourth quarter, Calix is guiding for adjusted earnings per share of between $0.33 and $0.39 on revenue of $261 million to $267 million. While the midpoint of its earnings guidance range exceeded the average analyst target of $0.35 per share, the midpoint of its forecast sales range fell short of Wall Street's consensus expectation. That sales guidance miss could be playing a significant role in Calix's sell-off.
But given that the company's Q3 results were quite strong, it's likely there are other factors behind the pullback, and an announcement from competitor Harmonic could be playing a role.
Harmonic published a press release Tuesday announcing its new high-density optical line terminal for its virtualized cOS broadband platform. With competition intensifying in the high-performance broadband virtualization and software services space, investors may anticipate a less promising growth outlook for Calix.
What comes next for Calix stock?
With Tuesday's sell-off, Calix stock is now down roughly 52% year to date. Even with that pullback, it still trades at roughly 24 times this year's expected earnings.
CALX PE Ratio (Forward) data by YCharts.
While Calix has a growth-dependent valuation, it is expanding sales and earnings at an encouraging clip. Investors shouldn't be too concerned about the company's sales guidance for Q4 falling a hair short of the analysts' average target.
Additionally, it's possible that investors are overreacting to perceived competitive threats. For risk-tolerant investors, Calix stock could warrant a closer look right now.
10 stocks we like better than Calix
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Calix wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of October 23, 2023
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
