Technology

Cloud Networking Stocks to Buy as Sector Stays Red Hot

F5 Networks

This company provides solutions for an application world. It helps organizations seamlessly scale cloud, data center, telecommunications and software defined networking (SDN) deployments to successfully deliver applications and services to anyone, anywhere, at any time. F5 solutions broaden the reach of IT through an open, extensible framework and a rich partner ecosystem of leading technology and orchestration vendors. This approach lets customers pursue the infrastructure model that best fits their needs over time.

With a new CEO, Manny Rivelo, replacing the very popular John McAdam, who will remain as the chairman of the board, the RBC team is interested the mid to longer term plans for the company. They point out that Rivelo was chosen from within the company so the status quo should remain the same. Again, security is helping to drive revenues as the company gains share from rivals.

The RBC price target for this top stock to buy is $138, and the consensus target is at $130.21. The stock closed Monday at $124.41.

JDS Uniphase

This company was a pioneer of the optical revolution that began in the 1990s and announced last year a plan to split into two separate companies. One will be an optical and laser company, while the second will be a network and service enablement company. Many Wall Street analysts have felt that this is a very positive catalyst for shareholders. In addition, company management remains very confident about the prospects of the business as the need for bandwidth across the world increases. As a result, the company is seeing strong demand in the Americas for its 100G products and LTE solutions.

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The RBC team points out the Datacom momentum is growing as the company has started going direct to large data centers utilizing the 40G/100G products. The spin-off should be completed by the third quarter of this year.

Recent analyst discussions with the company have been centered on the growth potential of JDSU’s fiber laser offering, which generated an annualized $60 million in revenue in the most recent quarter. The newest generation of offerings has 2, 4 and 6 kilowatts of output power. Some on Wall Street have also hinted at a possible Finisar JDS Uniphase transaction or merger.

The RBS price target is $17, and the consensus target is $13.71. The stock closed Monday at $12.84.

Radware

Radware is a global leader of application delivery and application security solutions for virtual, cloud and software defined data centers. Its award-winning solutions portfolio delivers service level assurance for business-critical applications, while maximizing IT efficiency. Radware’s solutions empower more than 10,000 enterprise and carrier customers worldwide to adapt to market challenges quickly, maintain business continuity and achieve maximum productivity while keeping costs down.

The company recently posted solid earnings and announced a new share repurchase plan allowing the repurchase of up to $40 million of ordinary shares. The RBC team is bullish on the company as the on-premise/subscription platform is resulting in gross margins of an astonishing 83%.

The RBC price target for the stock, which is rated Outperform/Speculative Risk, is $26, and the consensus target is $27.31. The shares closed Monday at $23.50.

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Aggressive accounts should have a position in this top growing technology sector. Demand continues to grow, as do safety and security concerns. The top stocks will be afforded rich multiples, if earnings can grow consistently higher.