Finally, after what seems to be an eternity, networking giant Cisco Systems Inc. (NASDAQ: CSCO) seems to have finally turned the ship around. With quarter after quarter of disappointing results finally behind them, and a much improved outlook in front of them, the entire sector may be set for a solid move higher. In a new report, Oppenheimer analysts think that given the solid quarter delivered by Cisco, and its better-than-expected outlook, investors can expect the supply chain to respond favorably, especially the companies that are leveraged to cloud and hyperscale data center and networking.
Here are some of the stocks that could see a nice bump from the strong results posted from Cisco.
Applied Micro Circuits Corp. (NASDAQ: AMCC) is a global leader in computing and connectivity solutions for next-generation cloud infrastructure and data centers. Applied Micro delivers silicon solutions that dramatically lower total cost of ownership. The company sells packet processors and 10G physical layers (PHYs) to both Cisco and Cisco’s optical module suppliers. The Thomson/First Call consensus is $13. Shares ended Wednesday at $8.65.
Avago Technologies Ltd. (NASDAQ: AVGO) not only gets a huge chunk of its business from Apple Inc. (NASDAQ: AAPL), but it is a big provider in the cloud/hyperscale data center and networking sector. The company supplies Cisco with application-specific integrated circuit (ASICs) for a variety of high-end gear and also indirectly sells into set-top box maker Scientific Atlanta by supplying ICs for disk drives that end up in DVRs. Investors are paid a 1.6% dividend. The consensus price target is $70.43. Avago closed Wednesday at $68.51.
Broadcom Corp. (NASDAQ: BRCM) disappointed with its first-quarter earnings results as the company struggled in its mobile and wireless business. The company’s profit dropped on a year-over-year basis, and despite an earnings beat, the stock got hit. Given the stiff competition from other industry giants, some think that the company could look for a buyer or become a merger candidate. The company sells a variety of products into Cisco: switch PHYs and ASICs, million instructions per second (MIPS) processors, cable modem infrastructure. Broadcom also sells cable modem and MPEG encoder (DVR) chips to Scientific Atlanta. Investors are paid a 1.6% dividend. The consensus price target is $32.29. The stock closed Wednesday at $29.83.
Cavium Inc. (NASDAQ: CAVM) generates close to 18% of its revenue from its association with Cisco with security and multicore embedded processors. With company-specific product ramps within Cisco, including 70-plus existing design wins, the company expects to double sales to Cisco over the next several years. The consensus price target for this top name leveraged to Cisco is $45.82. The stock closed Wednesday at $41.99
Freescale Semiconductor Ltd. (NYSE: FSL) is a global leader in embedded processing solutions, providing industry leading products that are advancing the automotive, consumer, industrial and networking markets. From microprocessors and microcontrollers to sensors, analog integrated circuits and connectivity. The stock has actually seen estimates rise over the past month for the current fiscal year by about 4.8%. The company sells embedded processors to Cisco. The consensus price target is $27.67. The stock closed Wednesday $21.60.
Intel Corp. (NASDAQ: INTC) also provides embedded processors to Cisco. The company’s new commitment to smartphone and mobile applications, combined with a possible resurgence of PC growth this year, may make Intel one of the best large cap value stocks to buy. Intel trades at a very low 13.5 times forward earnings. Investors are paid a solid 3.4% dividend. The consensus price target is $25.05. Intel closed Wednesday at $26.33.
Marvell Technology Group Ltd. (NASDAQ: MRVL) sells Cisco switch and system controllers and also sells indirectly through other vendors to Scientific Atlanta. The company pays investors a 1.6% dividend. The consensus price target is posted at $16.52. Marvell closed Wednesday at $15.30.
Juniper Networks Inc. (NYSE: JNPR) was oddly enough not included. It is considered to be the “mini-Cisco” by many investors, and this is where investors first flocked their secondary and tertiary trading dollars after the Cisco boost on Wednesday night. Its shares were up 1.6% at $25.00 in early Thursday trading as it rode the coat tails.
Cisco is now lumped into a group of stocks that are labeled “Old Tech.” To longtime Wall Street veterans that may seem a stretch. One thing is for sure, when you have the deep pockets and the long line of customers that Cisco has, a turnaround was never totally out of the question. Investors looking to not only own Cisco, but its top suppliers as well, may have some outstanding success going forward as Cisco continues to offer new and more advanced products.