COMM - Jefferies says CommScope's EBITDA expectations too high brokerage slashes rating and PT

2023-04-17 15:24:52 ET

CommScope ( NASDAQ: COMM ) shares fell as much as 11.4% on Monday after Jefferies downgraded the telecom network infrastructure company to Hold from a prior investment rating of Buy, along with a large price target cut.

The brokerage firm slashed its PT to $5.50/per share from $15.

“As we do more work on CommScope’s business lines, it’s apparent that EBITDA expectations for the business remain too high – not just for 2023 but also for 2024. While our prior thesis on the stock was predicated on the organization generating good cash flow – with that benefit accruing to the equity value of the business – it’s hard to envision the stock working as core business fundamentals worsen,” analysts at Jefferies wrote in their latest research report.

They trimmed their 2023 EBITDA guidance to $1.334B from $1.442B and cut 2024 EBITDA to $1.428B from $1.604B.

Jefferies also said balance sheet refinancing risks for COMM remains “significant” in a high-interest rate environment, coupled with recent volatility in the credit markets.

COMM stock has fallen 27.5% since the beginning of the year through April 14.

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