Cisco Systems, F5 Networks Among Deutsche Bank's Top Mega-Cap & Mid-Cap Ideas

Among the networking group, Deutsche Bank analysts have chosen their best-of-breeds: Cisco Systems, Inc. CSCO, F5 Networks, Inc. FFIV, Ciena Corporation CIEN and Arista Networks Inc ANET.

Deutsche Bank generally sees above seasonal strength in U.S. spending in enterprise and datacenters, while noting that Europe, the Middle East and Africa is holding up better than expected. It does note that Asia, including Japan, is seeing weakness.

Specifically, the analysts see software and cloud services, including Web 2.0, as secular growth themes that will continue to support Cisco.

Supported by security and telcos, analysts see F5 Networks beating on the headline, while issuing in-line to slightly positive guidance on the March quarter. Deutsche also notes that there is room to grow F5’s valuation into next year.

Among the small-caps, Deutsche said that Arista Networks is trading at a premium due to pending litigation and concerns about how price cuts on its 10GE port will impact gross margins. The analysts see this as an opportunity with the company beating and raising when it reports earnings.

Similarly, Ciena is well-positioned for gains with a FY16 P/E in the 12x, according to the report. The analysts point to improving order flow in EMEA and Latin America and potential to gain gross margins.

Ciena has underperformed during the past year, dropping 13 percent compared with 30 percent gains in F5, 22 percent gains at Cisco and 17 percent gains for Arista Networks.