While the Trump rally has been incredible, much of the move has been a result of big moves by high-dollar stocks. Investors looking for solid growth ideas should consider the huge possibilities for technology infrastructure as the massive growth in cloud computing, storage and security. Combine that with the huge growth in terabit optical, and you have the potential for some powerful gains over the next few years from a group of stocks that are still not expensive.
In a new Deutsche Bank research report from outstanding analyst Dr. Vijay Bhagavath, the case is made that service provider capital expenditures are increasing headed toward four critical silos.
- Artificial Intelligence
- Automation Software
The analyst also feels that the telecommunication and cable companies are looking to monetize their information technology assets and holdings by offering customers services with higher margins like video, cloud security, hyper-cloud and more.
The analysts feel that five top idea stocks are the major benefactors of this explosive growth. All are rated Buy at Deutsche Bank.
This company had a red-hot IPO and has backed up sharply since a secondary offer last fall. Acacia Communications Inc. (NASDAQ: ACIA) is a leading supplier of high-speed coherent optical interconnect products to network equipment manufacturers, hyperscale cloud companies and service providers.
The company’s foundation is in its Digital Signal Processing (DSP) and a unique approach with its silicon-based photonic integrated circuit (SiPhi PIC). The company primarily combines the DSP and PIC to create modules, which are integrated into optical/networking equipment to provide high-speed optical interconnect.
The stock was hit yet again after posting solid fourth-quarter numbers but offering very tepid guidance for the first quarter. Many feel that this could be the best tech value now.
The Deutsche Bank price target is a stunning $100, and the Wall Street consensus target is $81.67. The shares closed Monday at $52.78.
This is a top mega-cap technology stock pick at Deutsche Bank for 2017. 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.
Deutsche Bank likes the company’s stellar balance sheet, and the ability for the company’s gross margins to move close to the 65% range on a consistent basis as it moves away from the legacy products sold for switching and routing. Cisco is another company that could benefit from the tax on overseas money being lowered as it has a whopping $70 billion in cash, 90% of which is overseas.
The analysts cited this in the report:
Cisco’s Service Provider business (~25% of fiscal year revenues) is starting to see orders pickup, driven mainly by new Software and SaaS product focus: e.g. MobileNetwork, End Point Security, monetized as Recurring Revenues.
They also think the stock is cheap at 11 times price to earnings on the firm’s fiscal 2019 estimates.
Cisco shareholders receive a 3.4% dividend. Deutsche Bank has a $40 price target, and the consensus target is $35.11. Shares closed Monday at $34.19.