What Has The Market So Pessimistic About These Sliding Stocks?

ADTRAN, Inc. (NASDAQ:ADTN), a leading global provider of communications and networking equipment, is down by 5.4% after reporting mixed third quarter results. For its quarter, ADTRAN earned $0.19 per share on revenues of $158.08 million, beating profit estimates by $0.05 per share but missing revenue expectations by $2.19 million. Guidance was a little disappointing, as management guided for lower gross margins and revenues slightly below seasonal patterns for the fourth quarter. Shares are down by more than 30% year-to-date.

Analysts are cautious. Six have ‘Hold’ ratings while one has a ‘Buy’ rating. Northland Securities is the lone optimist, having an ‘Outperform’ rating and $20 price target on the stock. MKM Partners has a ‘Neutral’ rating with a $16.50 price target, while JPMorgan Chase & Co has a ‘Neutral’ rating and $16.50 price target as well. Overall, analysts have a consensus price target of $18.96, giving shares 22.6% potential upside from current levels.

Hedge funds were bearish on ADTRAN, Inc. (NASDAQ:ADTN) in the second quarter. A total of 12 funds reported long positions in Adtran worth $89.35 million (representing 10.30% of the float) as of June 30, down from 17 funds and $150.88 million respectively on March 31. Royce & Associates owns 1.67 million shares while Anand Parekh‘s Alyeska Investment Group owns 704,435 shares.

Given ADTRAN’s forward P/E of 22, it’s hard to get excited about the company until EPS grows faster than expectations.

Disclosure: None