3 Reasons Loop Capital Is Bullish On Arris International
Shares of ARRIS International plc (NASDAQ: ARRS), a media entertainment and data communications solutions provider, lost more than 12 percent of its value over the past year and doesn't reflect the company's "robust growth opportunities" ahead, according to one Wall Street analyst.
The Analyst
Loop Capital Markets' James Kisner initiated coverage of Arris International's stock with a Buy rating and $35 price target.
The Thesis
Arris International is looking attractive at current levels for three reasons, Kisner said in a note.
The company is a direct beneficiary from growth of cable networks through its Network and Cloud businesses which accounts for 30 percent of total sales and around 80 percent of segment operating profit.
The set-top box business, despite claims to the contrary, is more durable and the base of pay TV subscribers across the U.S. and internationally still has a "very long tail" ahead. In addition, set-top boxes in the home are cheaper for delivering content compared to cloud-based DVR alternatives.
The 2017 acquisition of Ruckus could generate "meaningful" revenue synergies as Arris is in a better position to help cable operators more aggressively enter the mobile backhaul business.
Arris' stock is trading at 8.4 times Kisner's 2018 EPS and 7.4 times on 2019's estimate, both of which are "significantly" below the broader communication equipment group's average of 14 times 2019 EPS. The analyst's $35 price target is based on a more "conservative" multiple on 2019 EPS given the company's earnings growth prospects.
Price Action
Shares of Arris were trading higher by around 0.8 percent Tuesday at $25.24.
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Latest Ratings for ARRS
Jan 2018 | Loop Capital | Initiates Coverage On | Buy | |
Dec 2017 | Morgan Stanley | Downgrades | Overweight | Equal-Weight |
Oct 2017 | Jefferies | Maintains | Buy |
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