We came across a bullish thesis on Harmonic Inc (HLIT) on ValueInvestorsClub by 4maps. In this article we will summarize the bulls' thesis on HLIT. Harmonic shares were trading at $11.23 when this thesis was published, vs. closing price of $13.59 on Sep 18.

A technician installing high-speed internet cables.

Harmonic Inc. (HLIT) has established itself as a leader in the broadband equipment industry, primarily known for its innovative software and hardware solutions that cater to cable internet providers. What sets Harmonic apart is its groundbreaking operating system, cOS, which serves as the backbone for modern broadband networks. This unique platform, combined with the company's advanced hardware offerings, enables service providers to deliver high-speed internet while maintaining flexibility and scalability.

See Also 33 Most Important AI Companies You Should Pay Attention To

Harmonic's core revenue streams are driven by three main elements: Distributed Access Architecture (DAA) systems, virtual Cable Modem Termination Systems (vCMTS), and broadband equipment. Their DAA systems have seen exceptional growth, capturing significant market share—estimates suggest between 50% and 70%—and offering a modular design that seamlessly supports the transition from coaxial to fiber networks. This flexibility is crucial as the industry shifts toward fiber optics, with Harmonic positioned as a key player in this transition. Their vCMTS product, essential for managing network traffic, holds a staggering market share of up to 98%, underscoring their dominance in this space.

Harmonic’s end markets include a diverse range of cable operators, telecom companies, and service providers globally. Notable clients include industry giants like Comcast and other major cable companies, who rely on Harmonic's technology to enhance their service offerings and streamline operations. This entrenched customer base provides a stable foundation for growth, as demand for high-speed internet continues to escalate, particularly in a world increasingly reliant on digital connectivity.

Despite the traditional perception of cable hardware companies as low-margin operations, Harmonic's unique positioning creates significant upside potential. The transition to DOCSIS 4.0 is projected to generate substantial revenue, with estimates suggesting that Harmonic could see up to $800 million in broadband revenue by 2027. As more service providers embrace Harmonic’s solutions, recurring software licensing fees are expected to rise, driving margins higher and enhancing overall profitability.