UPDATE: Brean Capital Reiterates On ARRIS Group On 3Q14 Preview

In a report published Friday, Brean Capital analyst Todd Mitchell reiterated a Buy rating on ARRIS Group (NASDAQ: ARRS), but lowered the price target from $40.00 to $36.00.

In the report, Brean Capital noted, “We believe Arris is well positioned in key product categories where growth will outstrip overall capital expenditures, and we note that the company has a significantly lower market share outside of the U.S., two factors that we believe point to a multi-year path of sustainable growth. However, Arris is its own worst enemy. Management will only provide one quarter forward guidance, and the market has not acclimated itself to the fact that, post-Motorola, the company is far more diversified than it used to be. Therefore, the stock tends to trade like a semiconductor company when in fact Arris' business should be far more stable. This is evident in the recent sell-off following cautionary comments from management about 4Q14 during its 2Q14 earnings call. We think the source of these comments could have mitigated and that when Arris gives its official 4Q14 guidance buy-side investors could be pleasantly surprised. However, sell-side estimates for 4Q14 remain stubbornly high, we suspect well above buy-side expectations, creating a conundrum that inhibits multiple expansion. As a result, we are lowering our target price to $36 from $40, but we reiterate our Buy rating.”

ARRIS Group closed on Thursday at $26.87.