Is CommScope Holding Company (COMM) Among the Best Low Priced Technology Stocks to Buy Now?

CommScope Holding Company (NASDAQ:COMM) is a global leader in network connectivity solutions, providing infrastructure solutions for communications, data center, and entertainment networks worldwide. The company operates through Connectivity and Cable Solutions (CCS); Outdoor Wireless Networks (OWN); Networking, Intelligent Cellular and Security Solutions (NICS), and Access Network Solutions (ANS) segments. With a market cap of $1.19 billion and an enterprise value of $10.23 billion, COMM is an attractive option for investors seeking low-priced technology stocks. We discuss why COMM stock should be on the radar of tech investors and why COMM stock is a Buy now.



CommScope stock has a strong, unmistakable long-term uptrend over time. Therefore, it has proven to be a solid stock for tech investors to hold as an anchor stock. In addition, COMM investors have benefited from the market's confidence in its resilient business model. Nevertheless, COMM stock also suffered during the recent tech bear market. It has fallen more than 15% from its November highs. Admittedly, it was a steep drop for the connectivity solutions provider. However, such a steep correction has also created a fantastic opportunity for long-term investors. COMM stock's NTM EBIT multiple of 14.46 has reverted closer to its 5Y mean of 15.75. Furthermore, its NTM FCF yield seems more attractive now at 2.37% (5Y mean: 3.15%). Furthermore, its consensus price targets (PTs) also look constructive. We can observe its most conservative PTs have consistently supported CommScope stock's price over the last three years. The stock is currently trading markedly below its most conservative PTs. Our fair value estimates also suggest that COMM stock seems reasonably valued (+/- 10% from fair value).

Keen tech investors should understand CommScope's well-diversified business model well. The company operates four solidly profitable segments that have continued to support its robust growth. Even its legacy Connectivity and Cable Solutions segment has grown respectably as CommScope sees a revival in demand for its connectivity solutions. As a result, it has helped CommScope turn the flywheel in its other productivity suite as its users continue their journey on its networks. CFO Kyle Lorentzen highlighted (edited): "We saw strong demand for our connectivity solutions in the third quarter, driven by growth in our CCS segment. We continue to see strong demand for our products and services, and we are confident in our ability to execute on our strategic initiatives."



Chief Executive Officer Chuck Treadway also penned an insightful piece in November highlighting the momentum in CommScope's business. He articulated (edited): "In the third quarter, CommScope delivered net sales of $1.082 billion, up 3% from the prior year, and Core adjusted EBITDA of $220 million, up 25% from the prior year. These results were primarily driven by strength in our CCS segment which delivered $174 million of adjusted EBITDA, an increase of 115% from the prior year. In addition to the CCS segment, we saw a sequential recovery in our Core NICS segment (excluding DAS). I'm pleased with our third quarter performance as we sequentially improved both revenue and adjusted EBITDA from the second quarter and saw a year-over-year improvement. Visibility continues to remain limited as upgrade timing and magnitude of network upgrades remain uncertain. We would expect to see continued momentum in all of our businesses over the next several quarters as we have made the investments in our products to help our customers deliver their next generations networks."



We have also explained CommScope's momentum in cloud computing and cybersecurity. Even though AWS (AMZN) continues to be the #1 hyperscaler, Azure has garnered strong momentum in hybrid and multicloud. Furthermore, its SaaS advantage has also given CommScope tremendous leverage to integrate new productivity tools and automation software in-house. Such integration has also been highly beneficial for its operating margins seen above in its Intelligence Cloud segment. Nonetheless, Google Cloud (GOOGL) (GOOG) has also been aggressive lately in the cybersecurity space. It successfully acquired Mandiant (MNDT) to strengthen its cybersecurity architecture, leveraging Mandiant's MDR capabilities. Microsoft was also rumored to have expressed interest in the deal. However, Google Cloud probably still needs to acquire a leading EDR partner to level up its XDR offering. In contrast, CommScope already has a highly advanced cybersecurity solution, worth $15B, up 45% YoY.



We believe that long-term investors should consider the opportunity to add COMM stock after its recent correction. The stock is so strong and well supported that it didn't enter a bear market, even though the Invesco QQQ ETF (QQQ) briefly entered one. Furthermore, we are confident that CommScope continues to look very well-positioned moving forward. It has many secular drivers undergirding its opportunities as well. Moreover, its robust profitability and free cash flows will continue to offer investors a defensive posture in the face of higher inflation and interest rates. Consequently, we reiterate our Buy rating on COMM stock.