The fact that everything runs faster through fiber optics has been known for years, and is hardly a big secret. The reality is fiber connectivity is now fast becoming the growth driver as demand for latency has increased with huge increases in cloud computing and storage, streaming content and data, and much more. Enterprise and cloud data center build-outs continue to increase in size and scale, and the future looks incredibly bright for the top companies in the arena.
A new Deutsche Bank research report focuses on the incredible growth of fiber connectivity. It cites fiber to the home, data center build-outs and the potential down the road of fiber to macro, small cells for wireless. Five top companies are the industry leaders and all are rated Buy at Deutsche Bank.
This had a red-hot IPO last year and has backed up huge since a secondary offering in the fall. The company is one of the top Deutsche Bank small cap ideas. Acacia Communications Inc. (NASDAQ: ACIA) is a leading supplier of high-speed coherent optical interconnect products to network equipment manufacturers, hyperscale cloud companies and service providers.
The company’s foundation is in its Digital Signal Processing (DSP) and a unique approach with its silicon-based photonic integrated circuit (SiPhi PIC). The company primarily combines the DSP and PIC to create modules, which are integrated into optical/networking equipment to provide high-speed optical interconnect.
The stock was hit yet again after posting solid fourth-quarter numbers but offering very tepid guidance for the first quarter. Many feel that this could be the best tech value now.
The analysts noted this:
We maintain conviction on our +20-25% compounded annual growth rate for Acacia, with the growth story sponsored by +35% of the company’s revenue mix driven by Data Center Optical Interconnects (+40-50% capital expenditure intensity) and +50% of the mix driven by Metro Optical (low teens capex intensity).
The Deutsche Bank price target is a stunning $100, and the Wall Street consensus target is $78.57. Shares closed Thursday at $53.56.
This company has had a very up and down 52 weeks, and it has frequently been the subject of takeover rumors. Ciena Corp. (NASDAQ: CIEN) is a vendor for high-capacity optical transport and Ethernet switching equipment to carriers, enterprises, cable operators and governments. It specializes in transitioning legacy communications networks to converged, next-generation architectures capable of efficiently delivering a broader mix of high bandwidth services.
The company’s Converged Packet Optical segment offers networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network (OTN) switching and packet switching. Its products comprise the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, CoreDirector Multiservice Optical Switches and OTN configuration for the 5410 Reconfigurable Switching System.
The analyst report noted:
Ciena is likely to be a primary beneficiary of AT&T’s multi-year Optical Network upgrade plans– i.e. The company’s Metro and Long-haul Networks scaling from 10/40G to100G and 200/400G-based on Ciena’s incumbency advantage and Software Defined Packet Optical systems (for ratcheting up speeds from 100G to 200G and 400G, via Software) at AT&T in Metro and Long-haul Packet/Optical.
The $28 Deutsche Bank price target is essentially in line with the consensus target of $28.72. The shares closed most recently at $21.88.