Viavi Solutions (VIAV) has been reshaped by a cluster of recent developments, including its addition to major Russell indexes and new AI focused testing products. These moves are putting the stock on more institutional and technology investors’ radar.

Those index moves and AI focused launches are landing against a mixed near term backdrop for Viavi Solutions, with the share price down 4.7% over the past week but still showing a 27.6% 90 day share price return and a very large 1 year total shareholder return. This suggests that momentum has been strong even as short term sentiment cools.

If Viavi’s AI testing push has caught your eye, it can be useful to see what else is on the move in this space by scanning 53 AI infrastructure stocks

With Viavi Solutions now carrying a very large 1 year total return and trading at a discount to the average analyst price target, the key issue for investors is whether there is still a buying opportunity or if the market is already pricing in future growth.

Most Popular Narrative: 26.9% Undervalued

On the most followed valuation view, Viavi Solutions has a fair value of $64.43 per share versus a last close of $47.07, which frames a sizeable upside gap and puts the current rally in context.

Viavi is experiencing robust and sustained demand across the data center ecosystem, with customers updating optical connectivity to 400G, 800G, and now 1.6T, enabling multi-year upgrade cycles and expanding its total addressable market, which should drive structural revenue growth through 2026 and beyond. The rapid proliferation of fiber broadband deployments for both hyperscale data interconnect and traditional carrier networks, coupled with aggressive announced spending by North American fiber operators, points to a significant near-term acceleration in fiber-related test equipment orders, supporting higher future revenues.

Curious what kind of revenue path, margin lift and future earnings multiple are baked into that $64.43 figure? The narrative leans on aggressive top line expansion, a sharp swing from current losses to strong profitability and a valuation profile more often associated with mature growth leaders.

The most widely followed narrative uses an 8.84% discount rate and assumes Viavi Solutions can grow into a much larger, more profitable business, supported by AI data center demand, fiber rollouts and expansion into aerospace and defense. It also factors in rising share count and a rich future P/E multiple to reconcile the current price with the projected fair value.

For readers, the key question is not whether the narrative is right or wrong, but whether these growth, margin and valuation assumptions line up with personal expectations around Viavi Solutions, given its current loss making status, debt profile and recent acquisition activity.

Result: Fair Value of $64.43 (UNDERVALUED)

However, investors in Viavi Solutions still need to weigh the ongoing weakness in wireless infrastructure testing and the execution risk associated with integrating recent acquisitions and new debt.

Another View on Viavi Solutions: Cash Flows Paint a Tougher Picture

That popular fair value of $64.43 for Viavi Solutions is built around earnings and multiples, but our DCF model comes out very differently. On that approach, the stock at $47.07 is above an estimated future cash flow value of $26.21, which points to an overvalued outcome instead of a discount.

For you as an investor, the takeaway is that the result flips depending on whether you focus on projected earnings power or modeled cash flows. The key question is which lens better fits how you judge Viavi Solutions.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Viavi Solutions for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 41 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If this split picture on Viavi Solutions leaves you slightly torn, consider moving directly from reading to reviewing the underlying data yourself and weighing the 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Viavi Solutions?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.