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Bull of the Day: Clearfield (CLFD)

Clearfield (CLFD) is a Zacks Rank #1 (Strong Buy) that manufactures, markets, and sells standard and custom passive connectivity products to the fiber-to-the-premises, enterprises, and original equipment manufacturers markets in the United States and internationally.

In a market that has been unkind to most stocks, Clearfield has been a clear outperformer. The stock is up 65% in 2022 and after a recent earnings report has taken out all-time highs.

Clearfield is doing something right, but in a market that is so negative, can the stock continue this momentum into 2023?

About the Company

Clearfield was founded in 1979 and is headquartered in Minneapolis, MN. It employs 250 people and has a market cap of $1.7 Billion.

Clearfield provides fiber protection, fiber management and fiber delivery solutions that enable rapid and cost-effective fiber-fed deployment throughout the broadband service provider space. The company has a strong competitive position as 5G and NG-PON2 technologies are rolled out to meet rapidly growing demand.

CLFD has Zacks Style Scores of “B” in Growth and “A” in Momentum. The stock has a Forward PE of 26 and has a Zacks Style Score of “D” in Value.  

Q4 Earnings Beat

Clearfield recently reported a 52% EPS beat for Q4. The company saw Q4 revenues more than double year over year and raised its 2023 revenue outlook. FY23 revenues were taken to a range of $380-393M v the $290M expected.

This quarter followed up on a monster Q3 and shows that the company’s earnings momentum is very strong.

Gross profit margin was down year over year, but their quarter over quarter backlog was up 148% y/y to $165M.

Clearfield is looking to build capacity to reduce their backlog, but is concerned that finding labor is an uncertainty.

Investors loved the quarter and the stock surged after the earnings report. It took just four trading days to take the stock up over 30 points to all-time highs.  

Analyst Estimates

Because of the big quarter, analysts are taking earnings estimates higher.

Over the last 7 days, estimates have spiked across all-time frames. For the current quarter, we have seen a move from $0.85 to $1.02, or 20%. Next year, estimates have gone from $0.85 to $1.09, or 28%.

Looking down the road, analysts are very excited for next the current year. Estimates have gone from $3.60 to $4.95, or 37%, over the last 7 days.   

Along with estimates, analysts are lifting price targets. Northland Capital lifted its target from $110 to $120 and Needham has gone from $115 to $135.

The Technicals

The stock is trading at all-time highs, so the question now is how much meat is left on the bone. To find a price target we can use the 161.8% Fibonacci extension, which can be found drawing the November highs to lows. This level is at $155, which is about 20% above current trading levels.

For those that want to avoid chasing the momentum, waiting for a pullback could be an option. The 21-day moving average is at $107, the 50-day MA is at $102.50. The 200-day MA is all the way down at $80.50 and not likely to print anytime soon.  

Bottom Line

Clearfield continues to post strong earnings momentum. With that, the stock has shown relative strength in a year that most stocks have been trading lower.  

Look for CLFD to close out 2022 on a strong note. If the company can continue to outperform on earnings, next year could be a breakout year for the company and the stock.

 

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