Harmonic Inc. (NASDAQ:HLIT) may be one of the most overlooked stocks in the last two decades. The stock traded at a high of above $15 in October, the highest since August 2001. A snapshot of the stock shows it has nearly doubled in value since the June lows of around $8.3. As of press time, HLIT has returned more than 16% YTD amid losses in the composite Nasdaq index.
Harmonic is a small-cap stock in the broader Communication – Components industry. However, Harmonic is seeing growth, unlike other tech names getting a hit due to economic tightening. High demand for the company’s cloud-based software solutions if fueling growth. With a focus on broadcast TV and video streaming, Harmonic has seen its market share continue to grow this year. That follows a Nielsen report in July showing a continued dominance of streaming services in the US.
The continued demand has been reflected in Harmonic’s third-quarter results. Revenue of $155.7 million or £133.90 million was up 23% from the prior year’s third quarter. The revenue exceeded estimates by 1.6% and is expected to grow 15% per annum over the next 3 years. The net income came at $8.74 million or £7.52 million, up 471%, beating estimates by 33%.
The latest financial results are a testament that the little-known stock could return massively to investors. The company targets more live sports streaming while also boosting its fibre business for faster speeds. With the growth trajectory, Harmonic is poised for further gains, although a PEG ratio of 1.68 could be a little worry for investors.
A technical outlook shows Harmonic on a correction since topping $15. The price attempted to recover at the 78.6% Fibonacci retracement level but has since pushed lower.
The likely lower level for Harmonic is $12.97, coinciding with the 61.8% Fib level. However, established support lies at $11.98, coinciding with the 50% Fib retracement level.
A bull signal at the 61.8% or 50% retracements should welcome buyers for Harmonic stock. A break below $11.8 would welcome a bear market for the stock.
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