The data networking arena is like all tech subsectors in that product upgrades and new technologies often drive the story for the top companies. With the industry’s Optical Networking and Communication conference taking place this past week in Los Angeles, many of those in attendance in the industry are also putting out press releases detailing new products.
Deutsche Bank remains very positive on the space, and analyst Dr. Vijay Bhagavath cites some specific products that look to be very meaningful for companies in the firm’s research coverage.
Bhagavath noted this in the research:
A top product and sales priority for Networking, Optical, and Test & Measurement suppliers seems to be on the 400G+ Cloud, Metro, and Sub Sea Packet Optical refresh opportunity, gauging from the new product announcements at the conference.
We reviewed the report, seeking companies that look to directly benefit, and found four that look like solid plays for aggressive accounts now. All are rated Buy at Deutsche Bank.
This company had a red-hot IPO in 2016, and it is the top small-cap idea at Deutsche Bank. 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. Its foundation is in its digital signal processing and a unique approach with its silicon-based photonic integrated circuit.
The company primarily combines these two things to create modules that are integrated into optical/networking equipment to provide high-speed optical interconnect. Deutsche Bank is very positive on the 400G+ coherent pluggable optical modules opportunity as a fiscal year 2020 and beyond growth driver for the company.
Deutsche Bank has a $60 price target on the shares, while the Wall Street consensus target is $53.19. The stock closed most recently at $53.27 a share.
This top mega-cap technology company recently reported an outstanding quarter. 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.
This sector leader also offered positive product information at the conference, and the analysts noted this:
Cisco first demonstrated NCS 1004 (Network Convergence System) in 2018, and has been testing on live networks over the past year: NCS 1004 achieved +10,000km subsea reach; successfully run 600G on live networks. CSCO and Australia’s Academic and Research Network (AARNet) successfully tested: 600G single wavelength in a metro data center to data center environment (~15 kilometers); 500G single wavelength over regional distances greater than 300 kilometers; 400G single wavelength over inter-capital distances greater than 750 kilometers.
Cisco shareholders receive a 2.73% dividend. The Deutsche Bank target price is $60, and the consensus target is $54.96. The stock closed Thursday at $51.29.
This more under-the-radar technology stock looks very interesting. Keysight Technologies Inc. (NASDAQ: KEYS) is a global electronic measurement technology and market leader helping to transform its customers’ measurement experience through innovations in wireless, modular and software solutions.
Its electronic measurement instruments, systems, software and services are used in the design, development, manufacture, installation, deployment and operation of electronic equipment. The Deutsche Bank analysts feel that the company could be a top beneficiary on the 400G+ test and measurement opportunity.
The $100 Deutsche Bank price target is higher than the consensus target of $91.89. The stock closed on Thursday at $84.50.
This smaller capitalization company has solid upside potential. Viavi Solutions Inc. (NASDAQ: VIAV) is a global provider of network test, monitoring and assurance solutions to communications service providers, enterprises and their ecosystems, supported by a worldwide channel community, including Viavi Velocity Solution Partners.
The company delivers end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. Viavi is also a leader in high-performance thin film optical coatings, providing light management solutions to anti-counterfeiting, consumer electronics, automotive, defense and instrumentation markets. The analysts see the company as an additional beneficiary on the 400G+ test and measurement opportunity.
The Deutsche Bank price target is $14. The consensus target is $13.90, and shares closed at $12.44 apiece.
Despite Wall Street concerns over slowing capital expenditure growth for the sector, the bottom line is that, overall, networking growth is sequentially pretty consistent, and these four top companies are priced well now for upside.