Jefferies & Co. expects that shares of Calix, Inc. (NYSE: CALX) will sell off modestly on Tuesday as investors contemplate another round of very conservative guidance from the company. The brokerage reiterated its buy rating on shares of Calix, while increasing its price target to $24.50 from $16.

We would encourage investors to use any weakness as a buying opportunity. Calix is a play on increasing penetration of higher speed broadband access services as well as an expanding market opportunity driven by Broadband Stimulus, new markets, new products, and potential entrance into new accounts such as Qwest, said George Notter, an analyst at Jefferies.

Combined revenues for 2011 are now expected to be $406 million. New 2011 EPS guidance for $0.82 is roughly consistent with Notter's previous views. Notter said he was contemplating a revenue expectation more in the range of $430 million.

Notter noted that he was modeling the Calix and Occam Networks organizations -- independently -- to generate $340 million and $106 million in 2011, respectively. Excluding eight weeks of Occam results (the deal closed February 22), Notter arrived around $430 million.

The Petaluma, California-headquartered Calix management commented that Occam had a significant Broadband Stimulus contract that was done under Section 398 accounting requirements. As such, the revenue recognition was taken right away in third quarter/fourth quarter -- to the potential detriment of 2011 results. More than anything, Notter also believes these new revenue expectations for the combined company are quite conservative.

Notter believes the new revenue guidance doesn’t seem to contemplate much, if anything, for potential new account wins, new product growth, or future international opportunities. The company’s brief history of very conservative expectations-setting also supports his view.

There are still significant improvements to the fundamental Calix story that will play out over the next 12 months. Our thesis continues to revolve around: Broadband Stimulus; the network upgrade opportunity at Frontier; potential account penetration at Qwest; margin expansion; and an attractive valuation vis-à-vis the peer group, said Notter.

Moreover, Notter expects that the organization will announce a new strategy for penetrating select international markets -- and significantly increase the size of its long term addressable market. Finally, the Occam acquisition gives Calix more critical mass and an accelerated product roadmap.

The brokerage raised its 2011 EPS estimate for Calix to $0.85 on revenue of $409.5 million from $0.65 on revenue of $345.7 million, while initiating its 2012 estimate of $1.80 on revenue of $560.4 million.

Calix stock closed Monday's regular trading down 0.20 percent at $20.42 on the NYSE.

Nyse Broadband California Qwest