Merrill Boosts Scientific Atlanta to 'Long-Term Buy'

Analyst Tal Liani likes the networking company's low valuation, large free-cash flow and solid customer base

Merrill Lynch upgraded Scientific Atlanta (SFA ) to long-term buy from accumulate, and keeps near-term neutral.

Analyst Tal Liani lowered the $1.39 fiscal 2002 (June) EPS estimate to $1.07 following the company's decision to withdraw its forecasts. However, he thinks issues are temporary, and provide a buying opportunity for long-term holders. He upgraded the long-term rating for the following reasons: valuation is low at 18.7 times the revised fiscal 2002 EPS; balance sheet is strong with $730 million in the bank, $240 million in annual free cash; customer base appears solid; his model assumes a worst case scenario of no growth in Europe and the U.S.; declines in transmission business; and he thinks set-top sales should climb to 1.2 million quarterly units in the next two to three quarters.

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