Cisco a Darling (CSCO), RIM (RIMM) a Dead Horse: The Best And Worst in Comm Equipment

January 3, 2013 2:51 PM EST
Get Alerts CSCO Hot Sheet
Price: $30.03 +0.13%

Rating Summary:
    32 Buy, 25 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 13 | Down: 22 | New: 54
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With plenty of macro and stock specific headlines, 2012 was an exciting year in communication equipment stocks. In anticipation of another year of white-knuckle action, analysts at MKM put out their list of most and least favorite names for 2013.

Cisco (Nasdaq: CSCO) - Topping the list of favorites was none other than tech heavyweight Cisco Systems. Analysts said they expect Cisco's year-over-year product order rate to accelerate in the current quarter (2QFY13) from flat last quarter.

"From a tactical perspective, our analysis suggests CSCO tends to outperform when the product order growth rate is accelerating. From a more strategic perspective, we believe the company is well positioned to define the next-generation vision for holistic Intelligent Networks built on a full suite of analytics and software, including SDN," said analyst Michael Genovese.

F5 Networks (Nasdaq: FFIV) - F5 Networks another favorite name for 2013. The stock underperformed in 2012 thanks to macro weakness. However, upgrades to its software platform may help offset concerns and lead to a revenue growth rate of 15 percent by Q2 2013, which would put it ahead of schedule.

2013 should be a better year for Service Provider capex and capex linearity. Genovese thinks focusing on 100G optical is the best way to gain exposure. Related Buy-rated names include Ciena (Nasdaq: CIEN), Finisar (Nasdaq: FNSR), JDS Uniphase (Nasdaq: JDSU).

MKM's least favorite names in the space include Nokia (NYSE: NOK), Research in Motion (Nasdaq: RIMM) Motorola Solutions (NYSE: MSI) and Riverbed Technology (Nasdaq: RVBD). Of the four, all are Neutral rated besides Rimm, which is rated Sell.

Genovese said the chances BlackBerry 10 will change RIM's fortunes are slim.

"According to our checks, BES10 is not backward compatible and BES5 is not forward compatible. RIMM is likely to ask Enterprise customers to run both servers simultaneously, which is especially tough to do when there are several competitive solutions for multi-OS mobile device management already available. We are concerned this could be the final straw that causes a meaningful portion of Enterprises to drop RIMM altogether," warned MKM.

Genovese also warned investors to avoid head fakes in Juniper (NYSE: JNPR) and Alcatel-Lucent (NYSE ALU), both Neutral-rated.

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