Canaccord Genuity lowers target price on Calnex

Canaccord Genuity said the timing of its recent initiation had "missed the mark", with Calnex yesterday warning of order push-outs and weaker-than-expected demand from global telecom customers.

"To be fair, after its main sales partner channel Spirent warned last week, the soft share price performance over the last days suggests investors were starting to brace for bad news," said Canaccord.

However, the Canadian bank stated that with Spirent flagging a roughly 20% sales decline this year and Calnex typically outperforming its sales partner in growth terms, it was "surprised by the magnitude of the demand softness".

As a result, Canaccord moved its estimates close to the bottom of the guided range, with the "severe sales decline" wiping out earnings this year.

"Such an unprecedented sharp drop this year with the secular and hyperscaler opportunities intact, makes a rebound in demand, EPS and the share price, in our view, more a 'when' not an 'if' question," concluded Canaddord, which reiterated its 'buy' rating on the stock.

Reporting by Iain Gilbert at Sharecast.com