Needham keeps its strong buy rating on Terayon Communication Systems (TERN ).
The maker of broadband systems for cable TV reaffirmed its fourth-quarter forecast and said it expects to be profitable by the second quarter of 2004.
Analyst Anton Wahlman says recent talks with cable industry representatives confirmed previous views about the centrality of its cable modem termination system (CMTS), DOCSIS 2.0 in particular, as far as it relates to the cable TV industry's future. He believes Terayon is likely to continue to gain share into early 2004 as it's the only company to deliver a DOCSIS 2.0 CableLabs qualified CMTS platform. Also, he says CMTS deployments in Asia with Adelphia are strong; this is positive for gross margins.
Wahlman narrowed the 7 cents fourth-quarter loss per share estimate to a 6 cents loss on $42 million in revenue. He notes cable company Comcast's validation of Terayon's systems should catapult Terayon to a leadership position. Wahlman is keeping his $10 price target on the shares.