Goldman Upgrades CommScope To Buy, Sees 18% Upside

Goldman Sachs’ Mark Delaney believes Commscope Holding Company Inc COMM could see upside potential of 18 percent.

Delaney upgraded the rating on the company from Neutral to Buy, while raising the price target of $33 to $35.

EPS Growth Expectations

“While we were incrementally positive on the stock after the company reported a 1.17 BTB for 1Q16 with strength in both fiber and mobile, CommScope announced a small cell win on May 2nd that gives us increased confidence on its ability to be successful in this key market for 5G,” the analyst mentioned.

Related Link: CommScope Falls 5%, Company Says Major Shareholder Sold 20 Million Shares

Delaney expects CommScope’s EPS to grow at a CAGR of 12 percent during 2016–2018, driven by debt reduction and the integration of the TE BNS acquisition.

The analyst believes a large part of the EPS growth in 2017 would come from self-help. The Analyst Day on May 16 and positive EPS revision are also likely to act as catalysts.

5G Technologies

Expressing confidence in the company’s ability to benefit from 5G technologies, such as small cells and fiber, Delaney noted that the “small cell win implies CommScope is better positioned than we had thought in the $2–$2.5 billion small cell market.”

Delaney also expects sales in mobile in 2016 to benefit from low supply chain inventory and the company’s limited exposure to China.

The EPS estimates for CY16, CY17 and CY18 have been raised to reflect higher sales and lower interest.