Why This Analyst Downgraded Fortinet And CommScope

While Fortinet Inc.’s (NASDAQ: FTNT) stock already prices in the company’s strong results, CommScope Holding Company Inc (NASDAQ: COMM) has limited catalysts to drive growth in the near term, according to BofA Securities.

The Networking and Security Analyst: Tal Liani downgraded the rating for Fortinet from Buy to Neutral, while reducing the price target from $385 to $355. In the same note, the BofA analyst also downgraded the rating for CommScope Holding from Neutral to Underperform, while lowering the price target from $12 to $8.

The Fortinet Thesis: Although the stock has risen by merely 3% since the company reported robust fourth-quarter results, this highlights “the difficulties to beat the high Street expectations after a few years of strong performance,” Liani said in the note.

The CommScope Thesis: Although the networking industry “is experiencing a robust growth cycle, with investments in 5G and network capacity post-COVID accelerating,” the company faces several near-term challenges, the analyst mentioned.

The Home Networks business declined by 18% year-on-year in the latest quarter and “is expected to continue generating headwinds in the short-term due to chip shortages, with management postponing the segment’s planned spin-off until supply constraints improve,” he added.

FTNT and COMM Price Actions via Benzinga Pro: Fortinet shares are down 3.09% at $325.32; CommScope shares are down 7.66% at $7.75 at publication Friday. 

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