Tuesday, November 07, 2006

Calls of Note Part 6

- FBR reiterates Outperform rating and $17 price target on shares of Arris (NASDAQ:ARRS), and views the stock's weakness Monday as a compelling buying opportunity for equity investors. First, they see few major risks related to the key fundamental question over the use of proceeds in any likely M&A scenario, and expect much of the overhang from the convert to lift as Arris' strategy takes shape. Second, they believe the offering signals management's confidence in the company's outlook, reinforcing their own checks that reveal improving demand and solid execution by the company. After perhaps a bit more downside in the very near term as convert buyers hedge positions, firm sees a compelling risk/reward for the shares, with as much as 50% upside over the next few quarters.

Firm views the mixture of share price pressure, increased volume, and a temporary "buyers' strike" due to the convert offering as a chance for investors with risk appetite to accumulate Arris shares at a significant discount to fundamental value. While it is difficult to call a bottom on this volatile name, they think the risk/reward at this point strongly favors long positions--and would be aggressive buyers while this window remains open.

Cash- adjusted ($2/share and a $0.06 EPS impact), the shares trade at 14x 2007E EPS. FBR thinks they should trade at a premium to the peer mean of 19x; $17 price target is based on 20x 2007E EPS plus $3/ share in cash by YE07.

Notablecalls: Would be looking for a bounce. The ideal trade would me to catch ARRS around $11 but I'm not sure it will get there.

1 comment:

4allvets.com said...

World's Largest Thanksgiving Dinner to Thank our Troops and Veterans at Thanksgiving.

I am involved in a really great program to thank our troops and all veterans of World War II, Korea, Vietnam, Desert Storm, and the War on Terror. Together, we can send them an awesome expression of support this Thanksgiving. Brian Littrell of The Backstreet Boys is the spokesperson.

All you have to do is register your Thanksgiving Dinner at www.4allvets.com to be included in the World's Largest Thanksgiving Dinner. On Thanksgiving Day, we will thank all our troops and veterans for protecting us and for protecting our freedom.

We want the young people of America to know that Freedom is not Free, so please register today. There is no charge to register and JUST BY REGISTERING, you will be showing your support of the troops and our veterans. When you register, if you want you can get your own web page to send to friends and family. For more information, go to www.4allvets.com.

There are 24 million veterans in America. Our goal is one million families thanking our troops and veterans this Thanksgiving! You are One in a Million, so please sign up today at www.4allvets.com.

We are losing 1,800 World War II veterans everyday, so let’s all say thanks before it is too late. So, pass this on to anyone and everyone who knows a veteran or one of our troops, or just wants to say thanks. To help reach our goal, put this on as many blog sites as possible, we want everyone in America to have the opportunity to thank and honor our men and women in uniform.

They stand watch for us; here is our chance to say thanks! Please don’t put it off, do it now—thanks!