ARRIS Should Benefit From The Escalating Competitiveness In Broadband Services

Although many of the current set-top box functions are likely to move to the Cloud over time, which is a fundamental risk for ARRIS International plc ARRS, the company’s set-top box business could generate “sustained revenue and profitability for longer than investors think,” Jefferies’ George C. Notter said in a report.

Escalating Competitive Environment

Notter initiated coverage of ARRIS with a Buy rating and a price target of $31, saying that the company is poised to benefit from escalating competition around broadband services. Over the past couple of years, several FTTP and 1 Gig broadband service announcements had been remarkable, just in the US alone.

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The announcements have spanned from large and small ILECs to cable operators. Notter expects the MSOs to roll their new DOCSIS 3.1 services “fairly aggressively” over the next two years. He commented, “This is a great backdrop for ARRIS.”

The stock is cheap and the risk/reward attractive at the current levels. “Moreover, the shares are close to a low point in terms of the multiple investors have been willing to pay for ARRIS over the past 3 years,” the analyst wrote.