RF Industries Ltd. (RFIL) PT Raised to $4.50 at B.Riley

B.Riley raised its price target on RF Industries Ltd. (NASDAQ: RFIL) to $4.50 (from $4.25) while maintaining a Buy rating.

The analyst commented: "Buy-rated RF Industries, Ltd. reported F3Q24 (Jul) sales of $16.8M that were below our consensus $17.8M but +7.6% Y/Y and +4.5% Q/Q as momentum builds with two-quarters of sequential sales growth. Gross margin of 29.5% came in notably higher than our 28.6% projection due to a more favorable production mix and is near the company’s previously outlined 30% near-term target. Meanwhile, EBITDA and pro forma EPS of $0.5M/$(0.01) missed our consensus of $1.0M/$0.06 due to the lower revenue base, although both improved materially Y/Y. Bookings were $18.9M, and the company ended the quarter with a $20.1M backlog that stands at $19.5M as of 9/16 compared to $18.0M at the end of F2Q24. With two quarters of sequential sales improvement, we believe the business is now at an inflection prior after significant wireless carrier capital expenditure cutbacks in 2023 negatively impacted the business over the past several quarters. While telecom companies are still cautious about large capex projections, the company is seeing increased demand for its higher-value products, such as Direct-Air Cooling (DAC) solutions and integrated small cell solutions. In this regard,
management confirmed that the company has two regional DAC deployment programs already underway that have a strong probability of being deployed nationally. Management also expects F4Q to demonstrate further sequential improvement, and we believe profitability could improve materially given the recent profitability improvements and inherent operating leverage in the business, particularly as revenue surpasses $18M per quarter. We increase our PT from $4.25 to $4.50, noting that RFIL shares trade well below the company’s ten-year average of ~$5/sh. despite the company’s improving sales momentum and optimized cost structure."

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