Is Fiber Optics The Next Hot Investment Sector?

In a new report, Northland Capital Markets analyst Tim Savageaux discussed the trading opportunity associated with the current 100G optical upgrade cycle. Northland initiated coverage on a number of names in the space and sees a long-term cyclical opportunity for savvy investors.

A Decade In The Making

According to Savageaux, the 100G opportunity has been 10 years in the making. He sees the upgrade cycle providing both fundamental and share price value for systems and component providers for years to come. “While we have seen some share price upside over the last few quarters in several sector names, the message of our analysis is clear and simple. It ain’t over, in fact it’s really just getting started,” Savageaux explained.

Related Link: Benzinga's Top Initiations

Ciena Corporation (NYSE: CIEN)

Although Northland has short-term concerns about the financial fallout from the Cyan acquisition, the firm believes that Ciena’s exposure to 100G among carriers worldwide makes it a potential long-term play. Northland initiated coverage at Market Perform with a $25 target.

Infinera Corp. (NASDAQ: INFN)

Northland believes that Infinera’s leading growth and profitability metrics and its technology and product leadership makes it the top pick among 100G plays. The firm initiated coverage at Outperform with a $30 target.

Lumentum Holdings Inc (NASDAQ: LITE)

Northland sees “stand alone exposure” to the 100G cycle and medium-term upside based on industry consolidation potential. The firm initiated coverage at Outperform with a $27.50 target.

Luna Innovations Incorporated (NASDAQ: LUNA)

Northland is also bullish on Luna and noted that the company’s recent acquisition of API further increased its exposure to the 100G cycle. The firm initiated coverage at Outperform with a $2 target.

Other Names

Northland believes that the power of the 100G cycle will likely have a far-reaching impact within the industry and will provide upside for a number of other names as well. The report mentioned NeoPhotonics Corp (NYSE: NPTN), Oclaro, Inc. (NASDAQ: OCLR) and MRV Communications, Inc. (NASDAQ: MRVC) as three other 100G stocks that Northland initiated at Outperform.

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