This is one of the top mega-cap technology stock picks on Wall Street. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide. It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.
Cisco offers service provider video infrastructure, including set-top boxes, cable/telecommunications access products, and cable modems, as well as video software and solutions. In addition, it provides collaboration products comprising unified communications products, conferencing products, telepresence systems and enterprise mobile messaging products; data center products, such as blade, rack and modular servers, fabric interconnects, software and server access virtualization solutions; security products, including network and data center security, advanced threat protection, web and email security, access and policy, unified threat management, and advisory, integration, and managed services.
The Deutsche Bank report said:
We see the company likely to increase its share of Carrier and Cloud capex spending for 100G+ Metro and Datacenter Optical network rollouts, as we head into 2017. CSCO’s 100G+ Metro design win at Verizon is a case in point. Cisco has the broadest set of Industrial IT design wins for Internet of Things Scale Cloud Networking platforms. We see 5G and IOT as a multi-year theme for the company, involving a wide range of hardware, software and Cloud Services portfolios.
Cisco investors receive a 3.45% dividend. The $37 Deutsche Bank price target compares with the consensus target of $33.11. The shares closed yesterday at $30.17.
This was a huge player in the fiber build-outs in the 1990s and may be ready to ramp back up for new deployments. Corning Inc. (NYSE: GLW) is one of the world’s leading innovators in materials science. For more than 160 years, Corning has applied its unparalleled expertise in specialty glass, ceramics and optical physics.
Its products enable diverse industries such as consumer electronics, telecommunications, transportation and life sciences. They include damage-resistant cover glass for smartphones and tablets; precision glass for advanced displays; optical fiber, wireless technologies and connectivity solutions for high-speed communications networks; trusted products that accelerate drug discovery and manufacturing; and emissions-control products for cars, trucks and off-road vehicles.
Deutsche Bank sees the company being highly leveraged to large spending growth that it expects to see in data center optical connectivity. The firm also ranked Corning as its top pick in the space going into third-quarter earnings, which beat estimates. A post-earnings report said:
We were clearly wrong in our bullish view on Hyperscale Clouds as a “near-term” growth driver for GLW’s Optical business. Fiber to the Home is clearly the primary near-term driver. Optical missed consensus, due to order timing issues (we believe) versus share loss.
The team sees the company as a winner in not only the new 5G wireless, but also in strong Internet of Things applications. They see both areas as infrastructure opportunities for the company given, what they say is the robust demand for IoT connectivity and 5G infrastructure builds. The analysts also note Cloud demand as a new growth driver for optical connectivity.
Corning investors receive a 2.22% dividend. Deutsche Bank has a $26 price target, and the consensus target is $23.28. Shares closed Monday at $24.32, so the Deutsche Bank target may be lifted at some point.
In the report, Deutsche Bank also cited Arista Networks Inc (NYSE: ANET), Ciena Inc. (NYSE: CIEN), Commscope Holding Co. Inc. (NASDAQ: COMM) and Keysight Technologies Inc. (NYSE: KEYS) as the other top companies for the networking infrastructure themes.
All these stocks are solid recommendations for portfolios with a higher risk tolerance. While earnings should be solid, if they do hit a quarterly bump in the road, they could get hit pretty hard.