Three Top Stocks Benefiting From Higher Web 2.0 Spending

By Trey Thoelcke Published Jun 3, 9:20AM EDT

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One thing that technology investors keep front and center on their radar screens is the level of spending over the industry. A new research report from the technology team at Deutsche Bank notes that their mid-second-quarter field checks suggest that there is “robust” and “slightly above seasonal” U.S. enterprise and Web 2.0 information technology (IT) spending trends.

The report points out that current spending by major companies is focused on “architectural upgrades.” Those are defined by the analysts as cloud-scale data centers, next generation security, broader use of Layer 4/7 features and more. The analysts also make the case that the market leaders with new product cycles who have a strong exposure to robust domestic enterprise information technology spending trends during this quarter are likely to see slightly above seasonal sales and order growth trends. That could bode extremely well for second-quarter earnings numbers.

Here are the three industry leaders that the Deutsche Bank team says are benefiting the most from the increase in spending this quarter.

Cisco Systems Inc.‘s (NASDAQ: CSCO) recent earnings surprise helped to lift the stock after many disappointing reports over the past year had continued to dishearten investors. Following up its solid quarter with another round of good earnings would be extremely encouraging, and higher spending levels could be just the ticket. We noted in a recent story that the networking giant could prove to be a good match with Rackspace as it is expanding its business in scale all over the globe. In addition, changes in technology make adding a large cloud computing entity a smart move for the Silicon Valley veteran. With more than $50 billion in cash, needless to say the company has the wherewithal to get a deal done. Investors are paid a 3.1% dividend. The Deutsche Bank price target for the industry network leader is $30. The Thomson First Call price target is $25.43. Cisco closed trading Monday at $24.78 a share.

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F5 Networks Inc. (NASDAQ: FFIV) has been on fire over the past six months, a recent pullback that started in March may provide a better entry point for investors. The company provides solutions for an application-based world and helps organizations seamlessly scale cloud, data center and software defined networking (SDN) deployments to successfully deliver applications to anyone, anywhere, at any time. The Deutsche Bank team points out in its report that the F5 Application Delivery Platforms with Layer 4/7 processing capabilities in hundreds of Gigabits range and 100s of 1,000s of application and user transactions, is seeing the Technology Acceptance Model (TAM) expansion beyond load balancing, security offload and Web acceleration. This translates into higher demand for F5 products. The Deutsche Bank target for the stock is $135, and the consensus target is posted at $120.97. Shares closed Monday at $109.57.

Mavenir Systems Inc. (NYSE: MVNR) is a leading provider of software-based communications solutions that enable mobile service providers to deliver high-quality Internet protocol-based voice, video, rich communication and enhanced messaging services to its subscribers globally. Mavenir’s mOne software platform has enabled leading mobile service providers to introduce the industry’s first live network deployment of Voice-Over-LTE (VoLTE) and the industry’s first live deployment of next-generation Rich Communication Services 5.0 (RCS). This LTE network deployment and expansion is also expected for data and could be a big revenue engine for Mavenir. The Deutsche Bank price target is $18. The consensus target is at $18.25. Mavenir closed Monday at $12.24. A move to the target would be a 50% gain for investors.

We recently wrote about Wall Street concerns over slowing spending at AT&T. However, the positive channel checks by the Deutsche Bank analysts seem to show other sector spending on the rise. What may prove a difficult quarter for some tech leaders could be just the opposite for others.

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.