On Thursday, CommScope Holding (NASDAQ:COMM), a network infrastructure provider, received an In Line rating from Evercore ISI, with a set price target of $1.25. The resumed coverage comes after the company reported earnings that fell short of expectations, taking into account the recent divestiture of its home networks business.
The company's outlook presented a bleak picture, citing difficulties across all end-markets due to high customer inventory levels. CommScope expressed uncertainty about when there might be an improvement in these markets. They also warned that if conditions do not get better in the latter half of the year, revenue and EBITDA for the calendar year 2024 could be "significantly lower" than in 2023.
Despite these challenges, there are some signs of optimism for a recovery in the second half of the year. CommScope has observed an increase in order volume within its Cable Connectivity Solutions (CCS) and Outdoor Wireless Networks (OWN) segments.
Additionally, the Network Infrastructure and Connectivity Solutions (NICS) segment, mainly comprising Ruckus revenue, could see a rebound, as indicated by similar expectations from industry peers Cisco Systems (NASDAQ:CSCO) and Extreme Networks (NASDAQ:EXTR).
The Broadband Equity, Access, and Deployment (BEAD) program funding is anticipated to be a driving force in CCS's recovery, with some funds expected to be allocated in 2024, while the majority is likely to be distributed in 2025.
CommScope has provided firm guidance for EBITDA in the range of $100 million to $125 million for the March quarter, a significant decrease from the $191 million reported in the December quarter. However, the company chose not to offer free cash flow (FCF) guidance, only mentioning that the March quarter would see a considerable use of cash.
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