Tuesday, B.Riley analysts maintained a Buy rating on Comtech Telecom (BCBA:TECO2m) (NASDAQ:CMTL) shares.
The adjustment came after Comtech Telecom's shares plummeted on Monday, contrasting with a slight gain in the R2K index. The stock's decline followed the company's release of its delayed 10-Q filing, an earnings call for the first quarter of fiscal year 2025, and the disclosure of another change in CEO, marking the fifth such transition in five years.
Ken Traub, the newly appointed chairman, has taken over the role from John Ratigan with immediate effect.
The company is currently navigating a challenging period, having reclassified its $206 million debt as a current liability. This move has sparked concerns about the company potentially breaching debt covenants when it reports its second-quarter results for fiscal year 2025.
Comtech has been undergoing an operational restructuring, which includes writing down goodwill and receivables, closing a UK-based antenna business, and discontinuing around 70 less-profitable products in its Space & Satellite business segment.
Despite these challenges, B.Riley analysts believe that Comtech's intrinsic asset value offers a favorable risk/reward scenario. The company has reportedly developed a positive relationship with its lenders and preferred stockholders and is actively working with them to restructure capital and enhance financial flexibility.
Furthermore, Comtech is exploring strategic alternatives, not only for its 911 business within the Terrestrial & Wireless Networks segment but also for parts or the entirety of its Satellite & Space segment.
This exploration is expected to lead to further reductions in force and facility consolidation, driving efficiency and cutting fixed costs. The 911 business, known for its strong market position and stable cash flow, has reportedly attracted significant interest from potential partners. B. Riley reduced the price target to $7.00 from the previous $9.25
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