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Hawk’s Nest

Unusual Call Accumulation in 5G and IoT Solution Provider

by | Aug 25, 2022

CommScope (COMM) seeing consistent bull flows and currently has nearly 50,000 calls in open interest and just 2400 puts. COMM since early August has seen buyers of 4550 November $10 calls, 2500 January $9 calls, 3000 November $11 calls and 4000 January $11 calls. COMM also has 2300 January 2024 $8 calls and 2500 of the $15 calls in OI and 1000 of the far OTM $20 calls bought for $1.25 late day on 8/25. COMM shares are down 6.5% YTD but up 55% over three months.

COMM is a global provider of infrastructure solutions for communication and entertainment networks. Its solutions for wired and wireless networks enable service providers including cable, telephone and digital broadcast satellite operators and media programmers to deliver media, voice, IP data services and Wi-Fi to their subscribers and allow enterprises to experience constant wireless and wired connectivity across complex and varied networking environments. COMM acquired ARRIS for $7.7B in 2019 to drive profitable growth in new markets, shape the future of wired and wireless communications, and be in a position to benefit from key industry trends, including network convergence, fiber and mobility everywhere, 5G, Internet of Things (IoT) and rapidly changing network and technology architectures. COMM has faced rising costs from Freight, Resin, Copper, Steel, and Aluminum inputs as well as chip prices. COMM also suffered from supply chain headwinds that are now easing.

COMM currently has a $2.2B market cap and trades 10X EBITDA and 1.4X EV/Sales with a 12% FCF yield. The company remains leveraged with Debt/EBITDA ratio of 8.1X. COMM has seen demand stay strong or fiber / wireless portfolio with pricing initiatives taken at year end helping overall profitability. COMM revenues are seen rising 6.6% this year with 10.4% EBITDA growth. COMM shares are now fairly valued but I would not rule out a strategic transaction, the company was taken private by Carlyle in 2010 for $3.9B and took it back public in 2013 before selling its stake in 2016 and then committed $1B in 2019 to finance the Arris deal.