Cloud Networking Stocks to Buy as Sector Stays Red Hot

The demand is huge for data, streaming video and audio, you name it. The demand is also huge for security in hyper-scale data centers. The bottom line is that the growth continues almost unabated, and a new research report from RBC points to some of the top companies in the firm’s coverage universe.

The RBC Mobile and Cloud investor day is Wednesday in Boston, and many of the top companies in the field will be there and presenting. It also gives the RBC team a chance to have direct conversations with the top executives from the industry. Here are five top stocks in the sector rated Outperform at RBC: A10 Networks Inc. (NYSE: ATEN), Amdocs Ltd. (NYSE: DOX), F5 Networks Inc. (NASDAQ: FFIV), JDS Uniphase Corp. (NASDAQ: JDSU) and Radware Ltd. (NASDAQ: RDWR).

A10 Networks

A10 Networks is a leader in application networking, providing a range of high-performance application networking solutions that help organizations ensure that their data center applications and networks remain highly available, accelerated and secure.

The RBC team says that investors are eyeing continued progress at the company as it improves on execution. The company has dealt with so-so carrier spending, seasonality in Japan, currency headwinds and enterprise selling deal cycles. They also cite security gaining traction at the company and expect revenue contribution this year.

The RBC price target for the stock is set at $6, and the Thomson/First Call consensus target price is $5.88. Shares closed Monday at $4.67.

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This company is a customer management software company that provides billing and customer relationship management software and services for communications, media and entertainment industry service providers worldwide. With revenue of $3.6 billion in fiscal 2014, Amdocs has more than 22,000 employees who serve customers in over 80 countries.

The RBC report indicated the company sees carrier consolidation as a market positive longer term. They also point out the company has strong visibility and revenues coverage generating an outstanding $600 million in free cash flow a year. They think the company can continue growing this business organically and through additional acquisitions. We recently cited the company as a possible takeover candidate.

Amdocs investors are paid a 1.3% dividend. The RBC price target is $59, and the consensus target is at $57.20. The shares closed Monday at $54.48.