Barclays on The Comm Equipment View: Sorting the Correction with the '08 Playbook

Barclays on The Comm Equipment View: Sorting the Correction with the '08 Playbook by Jeff Kvaal

Kvaal said, "We lower estimates and compare stock movements to the 2008 recession: Given the clear deceleration in the macro outlook, we have lowered estimates on many of our early cycle networking names. We also revisit the 2008 recession as a guide for how far stocks in our coverage roster may fall and when they may recover. We conclude that the most attractive large cap plays are QUALCOMM (Nasdaq: QCOM) and Juniper (Nasdaq: JNPR). In mid and small cap we highlight F5 Networks (Nasdaq: FFIV), Acme Packet (Nasdaq: APKT), ADTRAN(Nasdaq: ADTN), and Ciena (Nasdaq: CIEN)."

"Our economics team is downbeat - but not calling for another recession: While concerned about sovereign debt in Europe - even France - we retain our expectation for 2.0-2.5% US GDP growth in 2H11. While we are not anticipating a recession of the magnitude of 2008, we nevertheless believe 2008 can illuminate recent price action."

"A 2008 comparison indicates comm equipment is not near a cyclical low, is not close to recovering - and no sub sector is defensive: To match the 2008 recession, the NASDAQ has another 44% and ~9 months further to go. None of the subsectors - networking, infrastructure, or handsets, notched significantly better share price returns than others."

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