Calix (CALX 0.37%) 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.
