Infrastructure Bill Will Help this Low Beta Stock to Continue Its Momentum
Aug 24, 2021 by InvestorDestination Team
The last decade was a lost decade for Adtran, Inc (NYSE: CLDR) It looked like the company took one step forward and two steps backward. Its challenges can be blamed on its dependency on its largest customers. However, the company has been trying to diversify its customer base and is making progress. In general, the company generates the majority of its revenue from Tier 1 customer base. Slowly and steadily, it is increasing its exposure to Tier 3 and Tier 2 customer base. In the recent quarter, its revenue from Tier 3 US customers is up 51%, and European regional operators were up a combined 91% year-over-year.
In the past, the company generated the majority of its revenue from copper-based products. As the world moved from copper-based networks to fiber, the company made slow progress. Recently fiber-based products account for more revenue than copper.
The company is diversifying its product portfolio. It sees traction in its fiber access platform and Saas platform. In the recent quarter, its product booking is up 43% YOY. Its SaaS platform is helping the company improve its margins.
Now countries' desire to beef up their broadband offerings is acting as a tailwind to the company. The US infrastructure bill includes broadband spending, which will act as a catalyst to Adtran.
While COVD has ignited countries' desire to strengthen their broadband infrastructure, it has created a semiconductor supply shortage. Industry-wide supply chain issues are negatively impacting its revenue and gross margins. Supply shortages are a short-term challenge. Since it is an industry-wide situation, Adtran will not lose any customers due to this challenge.
Adtran has disciplined management and a strong balance sheet. Even during the COVD challenges, the company maintained its dividend, which attests to its disciplined management style. The company has diversified its customer base and product portfolio. Countries' desire to improve their broadband infrastructure will act as a catalyst for the company.
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