Technology

Top Jefferies Momentum Growth Stocks to Buy Have Huge Potential Catalysts

Ciena

This company has frequently been the subject of takeover rumors. Ciena Corp. (NASDAQ: CIEN) is a vendor for high-capacity optical transport and Ethernet switching equipment to carriers, enterprises, cable operators and governments. It specializes in transitioning legacy communications networks to converged, next-generation architectures capable of efficiently delivering a broader mix of high bandwidth services.

The company’s Converged Packet Optical segment offers networking solutions optimized for the convergence of coherent optical transport, Optical Transport Network (OTN) switching and packet switching. Its products comprise the 6500 Packet-Optical Platform, 5430 Reconfigurable Switching System, CoreDirector Multiservice Optical Switches and OTN configuration for the 5410 Reconfigurable Switching System.

President Trump’s tough stance on Chinese technology companies could be a huge catalyst for the company. The analysts noted this:

Using LinkedIn data, we drilled down into Huawei’s wavelength division multiplex market share position across the 50 top carriers in Europe. Based on our analysis, we believe that Huawei generates nearly $1 billion in total annual sales in Europe and looking at the accounts where there’s an overlap, we estimate that Ciena has ~$750 million in available market share opportunity. Furthermore, we believe that market share wins could come over more quickly than investors are anticipating as our analysis shows many carrier accounts where Ciena is already a secondary supplier to Huawei in Europe. We noted that in those situations, share could transition to Ciena without the long evaluation process. We continue to like Ciena shares and see them as a major beneficiary of market share consolidation in Optical systems.

The Jefferies price target is $63. The consensus target is $61, and the last Ciena stock trade on Friday came in at $60.99.

RingCentral

This smaller cap company also could be a great takeover target, and it is a member of the Jefferies Franchise Picks list. RingCentral Inc. (NYSE: RNG) offers a cloud-based solution for business communications that replaces legacy and expensive on-premise communications systems. It is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, text, fax, audio conferencing and integration with document and customer relationship management systems.

For some time, Jefferies has believed the company has multiple catalysts, including continued traction with mid/enterprise customers, increased partner traction, international expansion and continued dislocation in the industry from legacy PBX/UC vendors.

Last year, Avaya entered into a strategic partnership with RingCentral in which it will introduce a new unified communications as a service (UCaaS) solution. Under the agreement, RingCentral will contribute $500 million to the deal and will be Avaya’s exclusive provider of UCaaS solutions.

Jefferies feels the potential for growth is high, and the research report said this about the strong earnings:

The company’s second quarter results beat across the board and more impressively, we noted that the size of the subscriber revenue and total annual recurring revenue beats were larger than in the first quarter. The company’s updated revenue guidance was also strong as new subscription revenue guidance was increased by 1.8%, or $18.5 million, more than the $12.5 million beat in the second quarter. This strength is impressive and is driven by accelerating partnership momentum, int’l expansion and up market penetration. Ring Central’s execution, secular tailwinds, and ramping partnerships give us confidence about the second half and the likelihood of further acceleration in growth in 2021.

Jefferies recently raised its price target to $370. The posted consensus target for RingCentral stock is $341.54. Shares were last seen trading at $269.00 apiece.


These four stocks offer investors strength in their specific technology industries and the ability to generate some significant portfolio alpha. They are suitable for growth investors with a larger degree of risk tolerance.

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