Why Calix Inc. Shares Dropped

Is Calix's drop meaningful? Or just another movement?

Jan 9, 2014 at 3:51PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Calix (NYSE:CALX) plunged more than 10% Thursday after the company announced disappointing preliminary fourth-quarter estimates.

So what: Fourth-quarter revenue is now expected to be in the range of $93.5 million to $94.5 million, which will translate to adjusted earnings per share of $0.02 to $0.04. That's well below the already-weak guidance provided by the company in October, which drove shares down more than 30% after it called for Q4 revenue between $97 million and $103 million, with non-GAAP earnings per share of $0.03 to $0.08.

Meanwhile, analysts were looking for adjusted earnings on the same basis of $0.06 per share with sales of $99.53 million.

Now what: To explain the revision, Calix stated it's seeing a "greater than anticipated decline in traditional year-end 'budget flush' customer spending patterns than the company historically has experienced."

As a result, and even with shares currently trading around 12.5 times next year's estimated earnings, I can't blame investors for taking a step back until Calix can prove this lull is short-lived.

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Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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