CommScope Stock Gains On Rating Upgrade & Price Target Hike By Credit Suisse

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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