CRNT Stock Up 71% in 3 Months: Buy Now or Wait for a Pullback?

Ceragon Networks Ltd. CRNT shares have proven resilient, with a 70.7% gain in the past three months, outpacing the industry’s decline of 9.4%. Headquartered in Rosh HaAyin, Israel, Ceragon provides wireless backhaul and fronthaul solutions that enable cellular operators and other wireless service providers to increase operational efficiency.It has also outperformed the Zacks Computer and Technology sector and the S&P 500 composite’s growth of 4.5% and 3.3%, respectively.The gain is also better than some of the notable peers in the same space. Ciena Corporation CIEN, Cisco Systems CSCO and Extreme Networks EXTR have surged 27.3%, 6.4% and 16.9%, respectively.Price PerformanceImage Source: Zacks Investment ResearchThis impressive uptick in the stock price has left investors contemplating whether this rally can continue or if the stock is due for a market correction. Let us discuss CRNT’s prospects and ascertain how to strategize investment.CRNT’s Improving Financial PerformanceStrong demand for its solutions led to a 17.7% increase in revenues, reaching $102.7 million in the last reported quarter. Ceragon is witnessing a strong funnel of opportunities, particularly in the private networks' vertical in the North American markets. North America contributed $24.5 million to overall revenues in the third quarter of 2024.The company is diversifying its business into private network business. CRNT added four new private network customers in the third quarter of 2024, taking the count to 16 new customers year to date (as of November 2024), representing $11.5 million in incremental bookings.Image Source: Zacks Investment ResearchHealthy demand for its solutions in India is another plus. Revenues from India were $50.5 million, accounting for nearly half of the overall revenue in the third quarter. This growth reflects Ceragon's solid position in the Indian telecommunications market, which is expanding rapidly as it upgrades to 4G and 5G infrastructure. In the last reported quarter, Ceragon secured more than $18 million in orders from a key Indian client. This large order further expands Ceragon’s market share in India, where demand for high-capacity wireless products, particularly microwave and E-Band solutions, is expected to rise significantly in 2025.The company’s participation in the India Mobile Congress is expected to lead to increased opportunities in the country.For 2024, CRNT expects revenues between $390 million and $400 million, indicating growth of 12% to 15% year over year. CRNT’s Focus on New Products Bodes WellCeragon is making significant strides with its product roadmap and has secured orders from its new IP50EX solution. CRNT’s upcoming solution, IP-50EX Premium, will use millimeter-wave (mmW) frequency to deliver high capacity over longer distances. CRNT highlighted that IP50EX Advanced provides capabilities that fit the precise requirements of the Indian market and is expected to witness strong adoption.CRNT is already promoting its first Neptune-based product, the IP-100E. This product is intended to deliver 25Gps capacity in a single box with a reduction in costs. These advancements highlight Ceragon’s efforts to capitalize on the increasing demand for high-performance wireless technologies, strengthening its competitive edge in the market.CRNT’s Strong Profitability MetricsImproving top-line performance is positively impacting profitability. The company registered a non-GAAP operating income of $15.8 million in the last reported quarter compared with $8 million in the year-ago quarter. Non-GAAP earnings came in at 16 cents per share compared with 6 cents in the prior year quarter.Even without the one-time $5.1 million benefit related to collection from a debt settlement agreement reached with a South American customer, the non-GAAP operating income was $10.8 million, while non-GAAP EPS was 10 cents. This highlights the company’s extensive cost discipline measures.CRNT also reported a positive free cash flow of more than $10 million and had a net cash position of $8.8 at the end of the quarter. In comparison, CRNT has a negative net cash position of 4.4 as of Dec. 31, 2023.CRNT’s Inorganic Expansion Strategy on PointThe strategic acquisition approach has played a pivotal part in developing the company’s business. Acquisitions aid in obtaining synergies leading to cost reduction and enhanced operational efficiency through the integration of resources.CRNT recently announced the acquisition of End 2 End Technologies, LLC, a leading systems integration and software development company in the United States. The transaction is valued at approximately $8.5 million, with an additional potential payment of up to $4.3 million contingent on the company meeting specific financial targets in 2025, to be paid primarily in 2026.Management anticipates the acquisition to generate an additional $15-19 million in revenues in 2025. The deal is also expected to be accretive to Ceragon’s non-GAAP earnings in the second half of 2025.Prior to that, CRNT acquired Siklu in December 2023 and successfully integrated it in the first half of 2024. CRNT acquired Siklu to expand its footprint in North America with Private Networks and Small Service Providers. Siklu provides “multi-Gigabit wireless fiber” connectivity in urban, suburban and rural areas of North America. Ceragon expects the acquisition will add to its 2024 revenues by $25-$29 million.Northbound Estimates for CRNTAnalysts seem bullish about the stock, as indicated by the upward revision in earnings estimates in the past 60 days.Image Source: Zacks Investment ResearchCRNT Faces a Few ChallengesCRNT is facing a slowdown in certain public network domains outside of India, mainly due to a weak global macro environment, as well as demand for 5G by network users. Moreover, it faces intense competition from Chinese players in Latin America, Africa and some parts of Asia-Pacific (APAC), leading to pressured revenues.Ceragon’s Communications Service Provider (“CSP”) business saw a slowdown in the orders from Tier 1 customers in the third quarter of 2024. CRNT highlighted that the slowdown was due to the timing of network builds throughout the year, suggesting that the delay could be short-term. Nonetheless, tier 1 customers are often the largest sources of revenues for telecommunications equipment providers, so any slowdown in orders from this segment could lead to reduced revenue visibility.CRNT Trades at a PremiumCRNT’s stock is trading at a premium, with a forward 12-month Price/Earnings of 12.33X compared with the industry’s 8.32X.Image Source: Zacks Investment ResearchHow to Strategize Investment in CRNT?While India and North American markets hold promise, several challenges could put downward pressure on CRNT’s stock price. The slowdown of certain public network domains outside of India, slow CSP ordering, premium valuation and integration risks from acquisitions remain concerns.For now, holding CRNT stock remains the most prudent strategy, allowing investors to benefit from its growth prospects while navigating external risks.Currently, CRNT carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cisco Systems, Inc. (CSCO): Free Stock Analysis Report Ciena Corporation (CIEN): Free Stock Analysis Report Extreme Networks, Inc. (EXTR): Free Stock Analysis Report Ceragon Networks Ltd. (CRNT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks