What led to the stock Crash: Casa Systems Inc (NASDAQ: CASA) stock slightly rose over 1.3% in after-hours session on 18th January, 2019 post a steel fall of 22.17% (on 18th January, 2019; Source: Google finance) as the company issued a much weaker-than-expected forecast for its fourth quarter 2018 and the stock was downgraded by analysts at two broking firms. The analysts at both Stifel Nicolaus and Morgan Stanley downgraded shares of Casa Systems, a communications equipment company. Stifel downgraded the stock to hold from buy and lowered its price target to $14 a share from $18. Morgan Stanley downgraded the stock to equal weight from overweight, and lowered its price target to $11 a share from $18. Needham & Company LLC has reduced the price target from $19.00 to $14.00, but still have a buy rating on the stock.
Moreover, CASA’s fourth quarter results were affected due to lower than expected spending in hardware by certain MSO customers as they begin to transition from Integrated CCAP to Distributed Access Architecture (DAA). Therefore, the company saw higher than anticipated software-based capacity sales during the fourth quarter, and lower than expected hardware volumes. To a lesser extent the company has also experienced wireless product certification delays, which has affected the timing of our wireless revenue recognition,
Disappointing Guidance: Casa has issued preliminary guidance for the fourth quarter 2018, and expects revenue to be in the range of $63 million and $69 million, well under analysts’ expectations of $100 million. The company expects earnings per share of between 13 and 17 cents, below estimates of 20 cents. The company expects gross margins to come in at between 70% and 73%. The lowered revenue guidance is largely due to a change in customer preference. Moreover, for the fourth quarter of 2018, CASA expects Adjusted EBITDA between $17.5 million and $21.5 million
For FY 18, CASA expects Revenue between $292 million and $298 million, compared to the prior outlook of $330 million and $350 million. Gross Margin is expected to be in a range of 70% to 73%, compared to the prior outlook of high 60s % to low 70s %. Adjusted EBITDA is expected to be in a range between $94 million and $98 million. Non-GAAP net income is expected to be in a range between $76 million and $80 million, compared to the prior outlook of $76 million and $83 million. Non-GAAP diluted net income per share is expected to be in a range between $0.82 and $0.87, compared to the prior outlook of $0.80 and $0.88