We reported yesterday that the EMC Corp. (NYSE: EMC) and VMware Inc. (NYSE: VMW) strategic forum in New York City was used as a platform to not only showcase earnings and prospects for the two companies, but to also announce a new strategic joint venture carve out: The Pivotal Group. Analysts from across Wall St. were given a glimpse at the future of storage, data networking and data centers.
In a new report, analysts at Deutsche Bank A.G. (NYSE: DB) highlight stocks to buy in this growing space. They agreed with EMC and VMW’s list of major information technology (IT) spending themes. And they note that the biggest secular growth investment opportunities in the networking universe are in:
- Rollouts of nextgen mobile-aware and application-aware networks
- The network as a rich source of analytics
- Build outs of scale-out enterprise and telco cloud data centers
They were also dismissive of the consensus bear case arguments that understate the incumbency advantage of market leaders such as Cisco Systems Inc. (NASDAQ: CSCO) and F5 Networks Inc. (NASDAQ: FFIV), given the need to implement “robust” operational models for running cloud-scale data centers. They were also very bullish on these market leaders.
Cisco Systems Inc. (NASDAQ: CSCO) is rated Buy at Deutsche Bank, with a $24 price target. The Thomson/First Call consensus for the networking giant is also $24.
F5 Networks Inc. (NASDAQ: FFIV) is also a stock to buy, with a $116 price target. The Wall St. estimate for F5 is $113.50.
Though it is only rated Neutral with $19 target, the Deutsche Bank team thinks product wins for Juniper Networks Inc. (NYSE: JNPR) are a distinct possibility. The consensus price target for Juniper is higher at $22.50.
We recently reported on the adaptation of enterprise flash drives as an important trend in storage and networking. Flash is an important new technology for the enterprise that will reduce, though not eliminate, the need for hard disk storage. NAND flash supply, though not sufficient to replace a high percentage of all hard drives, is enough to have a significant high-end enterprise impact.
So who will be the first to integrate flash to their storage products? The likely candidates are, of course, the industry leaders like EMC Corp. (NYSE: EMC). EMC has a consensus price target of $30. Many firms believe the stock is very undervalued as its large ownership percentage of VMware Inc (NYSE: VMW) is not fully appreciated. The consensus price target for VMware is $100. If analysts are correct here, this could be a 20% gain for investors.
NetApp Inc (NASDAQ: NTAP) is another storage firm likely to incorporate flash into its product line. With industry leading network storage solutions, NetApp has a consensus price target of $40 and is a top pick at many Wall St. firms.
The bottom line for investors is new technology that expands capacity and capability will always win. Integrating flash into storage is an example of the kind of new technology that can help change the face of an industry. With mobility, cloud-scale data centers and a flood of innovation on the horizon, we may be at just the beginning of the data revolution.