The Share Centre downgrades Spirent to a ‘hold’

Helal Miah, investment research analyst at The Share Centre, explains why Spirent has been downgraded to a ‘hold’.

“Spirent’s trading statements in Q1 and Q2 of this year were relatively upbeat, however the most recent update released in October showed difficulties for the business. Trading conditions have softened in America and China, demand has dipped as a result of merger activity and in areas where Spirent has invested in capital, expenditure by customers has declined. As a result, the group downgraded its expectations for the second half of the year.

“The shorter term picture has been clouded by the merging of customers, resulting in cost cutting and profit warnings from rival companies. This prompted management to reflect on their performance and to announce radical changes, including changes in senior management to better align the business to customer's needs and demands. The management acknowledged the lack of past investments and efforts will be made to enhance the level of investments into various parts of the business.

“Spirent's long term prospects look attractive given the seemingly ever increasing demand for data, driven by the increasing sales of smartphones and tablet computers. However, given the short term outlook for the sector, we have downgraded our recommendation to a ‘hold’.”