The Deutsche Bank technology analysts did plenty of networking at the recent VMworld 2013 conference and came away with some pretty solid conclusions. A key insight from analysts information technology (IT) conversations at VMworld was that their thesis that market leaders in networking are well positioned to capture a growing percentage of IT software capital expenditure (capex) dollars appears to be spot on.
With an expected $350 billion to be spent in data center IT equipment, according to McKinsey data, the Deutsche Bank team is focused on the names that are poised to grab the largest share of the budgets. Here are the top stocks to buy that they expect to be the winners.
Ciena Corp. (CIEN) reported solid earnings yesterday morning as expected. The company benefited from the strong optical upgrade cycle and is on track for a very good year. Deutsche Bank has a $22 price target for the stock. The Thomson/First call estimate is at $22.50.
Cisco Systems Inc. (CSCO) got hit hard when it reported earnings in mid August, and investors have an outstanding chance to own the stock at a good entry point. With a huge focus on data center networking products, the tech giant is launching its Insieme platform near the end of this year. Deutsche Bank has a $28 price target for the stock, and the consensus target is $28 as well. Investors are paid a solid 2.9% dividend.
F5 Networks Inc. (FFIV) has been all over the board in the past year, trading in an almost 45 point range. Analysts around Wall Street in addition to Deutsche Bank are very positive on core growth accelerating in the second half of 2013 as data center orders build. Deutsche Bank has a $100 price objective, and the consensus target is $96.
Peregrine Semiconductor Corp. (PSMI) is a lesser known name that is a top stock to buy at Deutsche Bank. The company recently released a new radio frequency (RF) switch specifically designed for broadband cable systems. With HD content exploding, this could be a huge home run for the company. Deutsche Bank has a $14 price target for the stock, the same as the consensus target.
Qualcomm Inc. (QCOM) rounds out the list of top tech stocks to buy at Deutsche Bank. The company still has a dominant position in the mobile chip industry and has benefited largely because of its first mover advantage in the smartphone revolution. The company's performance has been spectacular in the past two years, with revenue and profits averaging 32% and 29%. While not leveraged to networking, their dominance makes the stock a core holding. The Deutsche Bank price target is $78, and the consensus target is $75. Investors are paid a 2.1% dividend.
The Deutsche Bank analysts feel that the networking theme, in tandem with big data and data center proliferation, is a long-scale proposal with no end in sight soon. The tremendous growth of data and content will only continue as more and more items are digitized. Investors looking for tech growth need to look at areas where commoditization is less of a threat. This may be just the area.
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