CommScope Valuation Largely Reflects Current Opportunity; Morgan Stanley Initiates At Equal Weight

Equity analyst Meta Marshall noted that CommScope's opportunity lies in its portfolio of efficient connectivity solutions, which carriers strive to have as they seek to provide better service for less revenues without having to cut down on their capital return program.

Morgan Stanley also highlighted CommScope's strategy of growing through acquisitions in order to broaden platform, realizing synergies, generating cash and paying down of debt. The firm sees meaningful earnings accretion opportunity for the company as it proceeds with the integration of its recently acquired TE Connectivity's Broadband Network Solutions for about $3 billion.

Related Link: CommScope Reports Sale Of 7M Shares By Affiliate Of Carlyle

Morgan Stanley's Equal Weighting for the shares of the company is due to the capex challenges faced by its telecom customers. The firm is still upbeat, given its belief that the company can see revenue growth from broadband investment or further network diversification.

The capex challenge on the customer end and the recent run up in the shares make Morgan Stanley stay on the sidelines. However, the firm is willing to turn more positive if telecom companies begin to increase their capital spending. That said, deterioration in macroeconomic fundamentals could force Morgan Stanley to turn negative on CommScope.

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