Why This Analyst Downgraded Fortinet And CommScope

While Fortinet Inc.’s FTNT stock already prices in the company’s strong results, CommScope Holding Company Inc COMM has limited catalysts to drive growth in the near term, according to BofA Securities.

The Networking and Security Analyst: Tal Liani downgraded the rating for Fortinet from Buy to Neutral, while reducing the price target from $385 to $355. In the same note, the BofA analyst also downgraded the rating for CommScope Holding from Neutral to Underperform, while lowering the price target from $12 to $8.

The Fortinet Thesis: Although the stock has risen by merely 3% since the company reported robust fourth-quarter results, this highlights “the difficulties to beat the high Street expectations after a few years of strong performance,” Liani said in the note.

The CommScope Thesis: Although the networking industry “is experiencing a robust growth cycle, with investments in 5G and network capacity post-COVID accelerating,” the company faces several near-term challenges, the analyst mentioned.

The Home Networks business declined by 18% year-on-year in the latest quarter and “is expected to continue generating headwinds in the short-term due to chip shortages, with management postponing the segment’s planned spin-off until supply constraints improve,” he added.

FTNT and COMM Price Actions via Benzinga Pro: Fortinet shares are down 3.09% at $325.32; CommScope shares are down 7.66% at $7.75 at publication Friday. 

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