Investing.com -- Morgan Stanley downgraded Commscope Hlding (NASDAQ:COMM) to underweight from equal weight, while brokerage kept its price target on the stock at $5.
The bank cited limited upside from operating efficiencies and a less compelling risk-reward profile following the third quarter results. While Morgan Stanley (NYSE:MS) believes in a recovery in telecom spending, it says expectations are already priced 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 views limited opportunities for meaningful debt reduction or cash flow generation even as CommScope expects to receive roughly $2.1 billion in cash proceeds following some divestitures.
Morgan Stanley’s bull case target dropped to $11 from $12, factoring in modest debt reduction. Its bear case stands at 25 cents, reflecting concerns about the company’s heavy debt load if costs rise or customer spending weakens 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,” analyst wrote.
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