Reports indicate that the last two months were tough on technology stocks. Particularly, close to 80% of the stocks are in correction. ARRIS International plc (NASDAQ:ARRS) is one technology stock whose value got hit by the bears.
In mid-November, CommScope (NASDAQ:COMM) agreed to acquire ARRIS in an all cash deal. Particularly, the transaction cost CommScope $31.75 per share. Together with payment of all outstanding debt, the transaction came to a total of $7.4billion.
ARRIS International plc share price impressive
In addition, CommScope announced that The Carlyle Group re-established an ownership position in the company. Particularly, the re-establishment adds $1 billion to CommScope’s cash on hand for use in short-term needs.
Interestingly, the transactions are responsible for sudden price shift for the stock. Before the acquisition, most of the important indicators depicted subdued strength and slow growth. However, the picture is different now after the acquisition.
Particularly, the relative strength index (RSI) suddenly shot from weak to super strong in a space of one month. Currently, the RSI reading is 71.23 which still means there is some strength in the stock’s price action.
Further, the 200-day and the 50-day moving averages are all positive. In particular, they both establish support at different prices. The 50-day moving average is higher than the 200-day at $27.36 and $26.38 respectively.
Significantly, the difference indicates a lot of price action in the last few days as compared to the last 200 days. Further, the moving averages show that the stock still has an opportunity to give investors higher returns.
The high price surge also comes with other burdens, like the stock being highly volatile. Usually, a volatile stock has a high probability of shifting suddenly to the downside.
To get a sense of the volatility index, we shall consider the average true range (ATR) for the stock. Normally, sudden shifts in the direction of the ATR indicate that the stock is highly volatile. For ARRIS, the ATR was highly volatile especially in mid-November but it seems to be bottoming out with time.
In particular, the ATR value in mid-November was 1.2 but the value bottomed to 0.373 in the present time. This indicates that the stock is less volatile today.
Further, the Williams Percent Range (Williams %R) value for the stock stands at -50.32. This is a drop from above -20 in just under a month. Interestingly, this indicates that the stock was highly overbought. However, as the stock tends towards -100, this indicates oversold tendency for the stock. As at now, the stock is stable.
The recent acquisition is also having a great influence on the firm’s earnings. According to the earnings report for Q3 2018, the revenue is improving. The agreement with CommScope enabled the firm to register high revenues for the last quarter.
Particularly, the revenue totalled $1.651 billion and GAAP earnings per share (EPS) of $0.26. Further, the firm reported cash resources of $520 million for the same quarter.
Interestingly, the operating activities saw the firm report $221 million of cash generated. As a result, the firm ended the quarter with $520 million in cash resources. Particularly, this is the cash the firm can use to comfortably cover its short-term needs.
Further, the company is still pursuing a share repurchasing program. So far, the firm reported to have purchased 13.9 million ordinary shares worth $353 million.
Given the indicators cited above, the growth score for the company stock is quite favorable. Further, the momentum score ranks higher. As such, it is clear that the stock will still experience growth in the coming days.
Various analysts, including Zacks Investment puts ARRIS stock in the top 20% of the most favorable stocks in the industry.