Tech Stocks to Buy: Acacia (ACIA)
Forward P/E Ratio: 15
YTD Performance: -27.7%
Similar to Ciena, Acacia is on a downtrend on worries over weakness in China, as some of Acacia’s biggest customers are in this region, including ZTE. Last quarter, the company reported earnings of 94 cents per share on revenue of $142.4 million. The company benefited from strong demand for its 100G and flex-400G products.
On May 9, Acacia reported first-quarter earnings of 77 cents per share on revenue of $114.7 million. It ended the quarter with $139.6 million in cash and cash equivalents. The company forecast second-quarter revenue of between $85 million to $95 million. The company’s light guidance sets out conservative expectations from investors. Factoring in potential delays in contract signings might explain why the CEO is not more bullish. If Acacia’s single largest company decides to boost capital spending, the stock will rebound. On its February conference call, the company said:
“We have seen a lower than anticipated order rate from one of our larger customers with exposure to the DCI market. This customer’s lower order rate is a major factor and how we formulated our first quarter guidance. We continue to see 2017 as a growth year for Acacia.”
Source: SA Transcript
Acacia’s growth will come from the DCI (optical data center interconnect) metro and the broadband infrastructure program in China. Though that outcome is far from certain, the company still must diversify its customer base. That would limit the company’s reliance on one customer.