Morgan Stanley Downgrades CommScope

Investing.com — Morgan Stanley downgraded CommScope Holding (NASDAQ: COMM) from equal weight to underweight, maintaining a price target of $5.

The bank cited limited upside from operating efficiencies and a less compelling risk-reward profile following Q3 results. While Morgan Stanley (NYSE: MS) believes in a recovery in telecom spending, it claims expectations are already baked into estimates.

With constrained refinancing options and a slower-than-expected service provider recovery, the firm sees near-term risks skewed to the downside.

Morgan Stanley perceives limited opportunities for meaningful debt reduction or cash flow generation, despite CommScope anticipating about $2.1 billion in cash proceeds from divestitures.

Morgan Stanley’s bull case target decreased to $11 from $12, factoring in modest debt reduction. The bear case target is 25 cents, reflecting concerns about the company’s heavy debt load if costs rise or customer spending declines further.

“In the near term, with refinancing options more limited and service provider recovery less linear than built into valuation, we see risk-reward skewed more cautiously,” an analyst stated.