Needham & Company Remains Bullish on ARRIS Group (ARRS) Following Announced Deal with Charter
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Needham & Company reiterated a Buy rating and $32.00 price target on ARRIS Group (NASDAQ: ARRS) following the company's announced warrant deal with Charter. The deal bears significant similarity to an agreement the company signed with Comcast in early July. Charter will be granted warrants to purchase between 0.5MM and 1.0MM shares based on purchases in 2016, between 1.0MM and 2.5MM in 2017 and between 1.0MM and 2.5M in 2018.
Analyst Richard Valera commented, "We are encouraged by the deal announced by ARRIS last night, in which Charter, the clear #2 in the US Cable market following its purchase of TWC, is incentivised to purchase increasing amounts of ARRS product in 2017 and 2018 in exchange for receiving warrants to purchase ARRS shares. Similar to the company's agreement signed with Comcast in July, we like this deal because it encourages the company's second largest customer to grow its business with ARRS in out years and ensures a certain portion of this business will be from the company's higher margin Network & Cloud segment. While it's tough to precisely quantify the impact of the agreement, we see it as supportive of the ARRS business seeing continued growth in 2017/2018. We maintain our Buy rating and PT of $32 or ~11x our C2017 NG EPS estimate."
Shares of ARRIS Group closed at $27.77 yesterday.
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