CIBC World Markets analyst Ittai Kidron upgraded the stock to Sector Outperformer yesterday, with a new price target of $14.
In his note, Kidron says:
Though Arris' September 24 commentary suggests 3Q07 is likely to land at the low end of guidance and light of consensus, we believe investors' negative reaction has been overdone. Near term, there does remain some uncertainty around 2H07 cable spending patterns; however, given competitive pressures, our 2008 cable CapEx outlook remains solid. As a result, we believe positive elements of Arris' 2008 business outlook are not reflected in the stock.
Kidron also notes that a $14 price target still only represents a 13.5x multiple of his 2008 EPS estimate of $1.03 for Arris. This is a discount to the median 22.5x multiple of 2008 EPS for Arris's peer group and a discount to Arris's three-year average multiple of 15.2x.
This should come as no big surprise, but Arris shares are up $0.47 (4.25%) to 11.50 so far this morning.
— Ryan Lawler, Reporter, Light Reading