CommScope downgraded for heavy debt load, ongoing supply-chain concerns

CommScope is a “good” company with a plan for the future, but the supplier remains under pressure by persistent supply chain constraints coupled by a heavy debt load. That’s a summation from Raymond James, which announced Monday it had downgraded CommScope shares to “underperform” from “market perform” ahead of the company’s Q1 2022 results.

That downgrade comes soon after a similar move by Bank of America, which downgraded CommScope from “neutral” to “underperform” and cut its price target from $12 to $8, citing near-term growth challenges.

The downgrades arrive at a vulnerable time for CommScope, which is undergoing a major overhaul under Chuck Treadway, who took over as CEO in the fall of 2020. CommScope recently restructured its core business, including forming a new Access Network Solutions unit, and combining its inside plant and cable connectivity units.

Among other strategic decisions, CommScope has delayed plans to spin off Home Networks, a unit that makes and sells set-tops, gateways and other customer premises equipment (CPE), due to the troubled supply chain environment. CommScope also confirmed recently that it had discontinued the sale of spectrum-management services for the shared 3.5GHz CBRS band.

“We consider CommScope a good company; management has a plan, yet it faces challenges with increasing input costs, and we worry that aggressive cost cuts could protect cash flow, yet jeopardize its future,” Raymond James analyst Simon Leopold explained in a research note distributed via email.

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