Saying that “networking is back,” BofA Global Securities analyst Tal Liani laid out a bullish case for a slew of networking hardware stocks, lifting his rating on Juniper Networks by two notches to Buy from Underperform.
Liani nearly doubled his price target on Juniper (ticker: JNPR) to $40, from $22. Juniper shares were up 2%, to $35.19 in morning trading.
The analyst also repeated his Buy ratings on Ciena (CIEN), Cisco Systems (CSCO), F5 (FFIV), and Arista Networks (ANET). Liani’s target for Ciena’s stock price went to $91 from $83, while his call for Cisco rose to $68, from $64. He now sees Arista stock reaching $153, from a previous call of $146.
Ciena stock was down 1.2% at $73.98, while Cisco was marginally lower at $61.76. Arista stock fell 0.2% to $ 132.39.
“We expect 2022 to be the year for data networking, with the industry ripe for growth as carriers continue to invest in network capacity post-Covid and 5G investments are realized,” Liani said in a research note. “Digital transformation, migration to cloud, and global 5G proliferation are driving network investments among telecom carriers, cable operators and cloud providers, as reflected in their spending plans.”
He also thinks supply-chain constraints should fade in 2022 and 2023, and sees revenue growth catching up with orders. “We believe most networking vendors are still attractively valued,” he wrote.
Liani said that the three primary U.S. wireless carriers— AT&T (T), Verizon Communications (VZ), and T-Mobile US (TMUS)—have all committed to increasing 5G site deployments. At the same time, he said, cable providers are investing in rolling out fiber to support increasing network bandwidth requirements. And he said the cloud companies are spending heavily to build out their infrastructure.
Ciena, Juniper and F5 are his top picks. He thinks Ciena is best positioned to benefit from an investment cycle in optical networking, with revenue growth accelerating from 2.5% last year to 12% next year. For Juniper, he thinks management guidance for 5% revenue growth looks conservative. And he thinks revenue growth could accelerate in 2022 at F5.
Cisco and Arista should also benefit from the improving networking outlook, Liani said, predicting that Cisco’s core switch and router business could shine in 2022. Arista, meanwhile, stands to benefit from a range of factors, including a rise in data traffic, demand for bandwidth, and the expansion of data centers.
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