Barclays on U.S. Data Networking & Wireline Equipment: Correlation of Euro to Networking Weak

June 14, 2012 1:32 PM EDT Send to a Friend
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Barclays on U.S. Data Networking & Wireline Equipment: Correlation of Euro to Networking Weak

Analyst, Jeff Kvaal, said, "We find a weak correlation between the euro/USD exchange rate and networking demand, and essentially no correlation between the euro/USD and networking stock prices: Using EMEA Ethernet switch ports as a proxy for networking demand, our analysis reveals very low (<0.5) correlation between the euro and demand over the past five years. Networking stock prices also show no correlation."

Kvaal notes that several networking stocks are down at least 20% from 2008/2010 cyclical low multiples including APKT, ARUN, FFIV, Juniper (Nasdaq: JPNR), PLCM, Riverbed (Nasdaq: RVBD), and ShorTel (Nasdaq: SHOR).

For Overweight rated Acme Packet (Nasdaq: APKT), Barclays lowers price target from $35 to $32, FY12 EPS estimate from $0.98 to $0.93, FY13 from 1.39 to $1.26.

OW rated Aruba Networks (Nasdaq: ARUN), PT lowered from $20 to $18 and FY13 EPS estimate cut from $0.84 to $0.80.

Equalweight rated Polycom (Nasdaq: PLCM), PT lowered from $15 to $14, FY12 EPS estimate cut from $0.94 to $0.91 and FY13 from $1.22 to $1.12.

All in, Barclays Kvaal sees Cisco (Nasdaq: CSCO) and F5 Networks (Nasdaq: FFIV) as attractive large caps, with strong fundamentals, and BroadSoft (Nasdaq: BSFT) and NetGear (Nasdaq: NTGR) as runners-up in the mid cap range.


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