Harmonic Inc. (NASDAQ:HLIT) had a stellar month of September. The stock has returned by more than 17% amid a drop of 7% in the benchmark S&P 500 index. The stock has also been strong this year, returning 8.15% YTD.
Harmonic is an American tech entity offering server, video routing, and storage products. The company targets entities involved in producing and marketing video content via the internet or TV.
Fundamentally, Harmonic has been growing revenues. The company reported an adjusted per share of $0.16 in the second quarter, from $0.05 per share the prior year. The street had anticipated just $0.09 per share. The revenue grew by 39% to $157.4 million or £148.5 million. The revenue was expected at $150.1 million or £141.6 million.
Harmonic breaks out above $11 but how attractive is it?
Harmonic had formed a double top at $11. It has broken past the resistance level and currently trades at $13. However, at the current price, valuation could be a concern. The company trades at a price-earnings multiple of 39 and a forward PE multiple of 26.9. That makes the stock less attractive.
We still need to be mindful that the stock attracted a lot of volumes following a breakout. That suggests that buyer interest remains high.
Adding the Bollinger bands, Harmonic has broken above the upper limit. A correction is likely, with potential levels to watch at $11.75 and $10.70. The $10.70 support coincides with the Bollinger Bands average and remains a crucial price action zone for Harmonic.
When to buy Harmonic
Consider investing in Harmonic on a retracement as it is still attractive. A long-term hold may be unfavourable considering the high valuation of the stock.
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