Ciena, Cisco And Others Poised To Cash In On The Big Data Boom
Analysts at Deutsche Bank say they believe that networking leaders Ciena (NASDAQ: CIEN), Cisco Systems (NASDAQ: CSCO) and F5 Networks (NASDAQ: FFIV) are well positioned to benefit from the increase in IT spending for data centers forecast at the recent VMworld 2013 conference.
Below we take a look at how these three stocks have fared and what analysts expect from them.
This network equipment maker posted better-than-expected quarterly earnings results this week due in part to strong telecom spending. The Hanover, Maryland-based company sports a market capitalization of more than $2 billion. Its long-term earnings per share (EPS) growth forecast is more than 17 percent.
Note that the number of shares sold short in Ciena represented more than 20 percent of the float as of the August 15 settlement date, though they were down marginally from a year-to-date peak in mid-June. Days to cover rose to about eight, the highest level since February.
The consensus recommendation of the analysts surveyed by Thomson/First Call who follow the stock is to buy shares. Their mean price target, or where the analysts think the share price will go, is less than the current share price. Analysts, including Deutsche Bank, see no upside at this time.
The share price has popped more than 13 percent in the past couple of days and is again near the 52-week high. It is up more than 48 percent year-to-date. Over the past six months, the stock has outperformed competitor Cisco Systems and the broader markets.
See also: Ciena Posts Narrower FQ3 Net Loss
The company recently said it would acquire Sourcefire (NASDAQ: FIRE) and declared a quarterly dividend this week. Cisco has a dividend yield near 2.9 percent and a market cap of more than $126 billion. Its operating margin is greater than the industry average and the return on equity is almost 18 percent.
The short interest in this San Jose, California-based networking giant was about one percent of the total float at mid-August. That was the smallest number of shares sold short in at least a year, and about 11 percent less than a month earlier. The days to cover was a little more than one.
Of the 39 analysts surveyed, 10 rated the stock at Strong Buy and another 16 also recommend buying shares. The analysts' mean price target indicates that they see about 12 percent potential upside. The Deutsche Bank price target is more than 15 percent higher than the current share price.
The share price has retreated about nine percent since hitting a multiyear high back in August. It is still up almost 17 percent year-to-date. Over the past six months, the stock has outperformed peer Juniper Networks (NYSE: JNPR) but underperformed Alcatel-Lucent (NYSE: ALU).
The company introduced its new VMware NSX network virtualization platform at the recent VMworld 2013 conference. F5 Networks is headquartered in Seattle and it has a market cap of almost $7 billion. The long-term EPS growth forecast of this S&P 500 component is almost 14 percent.
The number of shares sold short as of the most recent settlement date represented more than six percent of the total float, after rising more than 24 percent during the period. That was the highest level of short interest since the end of March. The days to cover rose to almost three.
Six of the 35 polled analysts rate the stock at Strong Buy and another 18 recommend buying shares as well. The analysts' mean price target is almost nine percent higher than the current share price. Deutsche Bank sees more than 13 percent upside potential. Note that both price targets are less than the 52-week high.
The share price is more than 15 percent lower than at the beginning of the year, but it is up more than 25 percent from the 52-week low back in June. The stock has underperformed competitors Cisco Systems and Juniper Networks, as well as the broader markets, over the past six months.
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At the time of this writing, the author had no position in the mentioned equities.
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