- Credit Suisse analyst Sami Badri upgraded the ratings on shares of Commscope Holding Company Inc COMM to Outperform from Neutral and raised the price target to $17 from $11.
- The analyst went for the upgrade based on sector checks, model driver review, and debt paydown greater than consensus.
- Driven by significant multi-year ARPA, RDOF, and BEAD government funding, Badri anticipates the company to be indexed to multi-year tailwinds in its core product segments.
- When combining the dollar amounts of announced government programs, the analyst finds that about $2.2 billion per year will be made available over each of the next five years for broadband infrastructure equipment providers.
- Related: CommScope Beats On Q2; Predicts Stronger 2H
- Badri added that Commscope likely would be a key multi-year beneficiary of the funding due to its product set relevance to broadband projects.
- The analyst cited most segments have been heavily supply constrained, limiting shipments versus bookings, a trend he believes can be overturned in FY23 as supply chain pressures abate as decreasing consumer.
- For the above reason, Badri grows more confident in company’s revenue forecast, projecting revenue growth of 3.4% - 4.7% in FY23/24, helped by better margins, less interest expense, and easing supply chain woes.
- The analyst expects working capital to begin freeing in Q4 FY22, followed by a lower cash-consuming FY23, enabling $500 million of debt paydown in FY23.
- Price Action: COMM shares are trading higher by 15.12% at $11 on the last check Tuesday.
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