CommScope: A Wallet-Share Gainer At An Attractive Entry Point

Morgan Stanley said in a note Thursday Commscope Holding Company Inc COMM is positioned to be a wallet-share gainer, as carriers build more efficient networks, outweighing concerns over near-term volatility or elongation of FTTH builds.

The firm believes an attractive entry point is created by market overreaction on the length of disruption. Consequently, the firm upgraded shares of CommScope from Equal Weight to Overweight but maintained its price target at $38.

At the time of writing, CommScope shares were rallying 0.91 percent to $33.15.

Analysts Meta Marshall, James Faucette and Yuuji Anderson said they remain believers that longer-term tailwinds — such as a need for more efficient networks, increasing need for backhaul, ability to capitalize on technology transitions and flexibility of cash generation — remain more powerful and beneficial to the company than the near-term headwinds.

The near-term headwinds discussed by the firm include pauses in investment in the FTTH markets, M&A disruption and international market weakness.

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Morgan Stanley believes the 8-percent top-line and 19-percent bottom-line cut CommScope took to its 2017 expectations at its second-quarter results represents a realistic outlook for 2017. The firm sees chance for more recovery in 2018 than built into current expectations as M&A transactions close and FirstNet projects begin.

"We believe it will take into the beginning of '18 to start seeing more meaningful upside to current expectations that could lead to appreciation to our $38 PT," the firm concluded.

______ Image Credit: By CommScope (Flickr: Mobile World Congress 2012) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons