The top carriers like AT&T and Verizon often can drive earnings for the top communications technology stocks. There has been no shortage of hand-wringing on Wall Street over the amount of capital expenditures the mega carriers would pump out this year. Especially with major deals making headlines like the AT&T purchase of DirecTV and the possible Sprint and T-Mobile merger.
A new report from UBS, while acknowledging the difficulty in fully handicapping the capex numbers going forward, indicates that the firm’s Buy-rated companies are exposed to areas of spending priority, including IP routing (edge), optical transport and broadband access. Their products are also deployed in areas of the network where the UBS team believes the wireless/wireline distinction is less relevant as ultimately all traffic requires an intelligent IP services delivery edge and robust access and transport infrastructure
Here are the six stocks rated Buy at UBS for investors looking to add communications technology names to their portfolios.
Calix Inc. (NYSE: CALX) could be a big winner and leads off the stocks rated Buy at UBS. The company provides broadband communications access systems and software for fiber and copper-based network architectures that enable communications service providers to connect to their residential and business subscribers in North America.
The company’s Unified Access portfolio of broadband communications access software, systems and services enables communications service providers worldwide to transform their networks and become the broadband provider of choice to their subscribers. UBS has an $11 price target for the stock. The Thomson/First Call consensus target is $12.17. Shares closed Friday at $7.91.
Ciena Corp. (NYSE: CIEN) is a company that many analysts, including the UBS team, believe could be the top beneficiary of an increase in wireless spending. Ciena management is optimistic about its prospects in the United States and in markets such as Brazil and India, where it has landed Tier 1 design wins. Recently, it also won a contract from Cablevision Argentina, which is a leading cable TV and Internet services provider in Argentina, to enhance its broadband network countrywide.
The company is rapidly reducing its losses, and the earnings growth outlook for the next five years is also quite promising. According to Yahoo! Finance, investors can expect Ciena’s earnings to improve at an annual rate of 16.7% for the next five years. The UBS price target for the stock is $27. The consensus estimate stands higher at $28.53. Ciena closed Friday at $20.55.