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Why ARRIS Group (ARRS) Could Reach $36

Story updated at 9:55 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Jefferies raised its price target of ARRIS Group (ARRS - Get Report) to $36 from $30 Thursday, reiterating its "buy" rating for the company.

ARRIS rose 7.4% to $30.00 in morning trading.

Analyst James Kisner said there is a high upside for the company given an accelerating STB refresh cycle and heightened competition in broadband networking equipment. Kisner also noted that ARRIS posted fourth-quarter earnings and revenue that were above analyst estimates. The company's first-quarter guidance is also above analyst estimates.

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Separately, TheStreet Ratings team rates ARRIS GROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ARRIS GROUP INC (ARRS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ARRS's very impressive revenue growth greatly exceeded the industry average of 3.6%. Since the same quarter one year prior, revenues leaped by 198.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, ARRS's share price has jumped by 64.48%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ARRS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 434.55% to $36.04 million when compared to the same quarter last year. In addition, ARRIS GROUP INC has also vastly surpassed the industry average cash flow growth rate of 19.40%.
  • ARRIS GROUP INC's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ARRIS GROUP INC turned its bottom line around by earning $0.46 versus -$0.18 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.46).
  • The net income growth from the same quarter one year ago has exceeded that of the Communications Equipment industry average, but is less than that of the S&P 500. The net income increased by 0.5% when compared to the same quarter one year prior, going from $17.86 million to $17.96 million.
  • You can view the full analysis from the report here: ARRS Ratings Report

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