Technology

Deutsche Bank Reveals Top Data Networking Picks for 2019

Lee Jackson

Published: December 19, 2018 7:35 am

Last Updated: January 11, 2020 1:31 pm

It’s that time of year again, the time when all the top firms that we cover here at 24/7 Wall St. start to make their prognostications and stock picks for 2019. This not only gives investors a bit of a head start on year-end portfolio reshuffling, but it also gives them a look at what the overall macro thoughts for the coming year are at the big brokerages and banks.

Given the extreme selling we have witnessed this year, many investors remain nervous and may be reluctant to buy shares now. However, the big ubiquitous trends like data, networking and infrastructure analytics are not going away. In a new report, Deutsche Bank has seven top alpha picks for 2019. Here we focus on four of the largest, best-known of those companies. Of course, they are rated Buy at Deutsche Bank.

Cisco

This top mega-cap technology company recently reported an outstanding quarter. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.

It provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.

Cisco posted solid numbers in November, and the stock has acted well all year long. Toss in the continuation of a massive $25 billion share buyback plan, and investors should be well rewarded going forward. Deutsche Bank said this about the company:

Cisco is a fundamentally underappreciated Mega Cap Tech stock, with potential upside to conservative consensus expectations driven in Fiscal year 2019+ mainly by Enterprise and Cloud Infra Platforms product cycle refresh (Campus Networking, 100/400G Cloud Switch Router upgrades, 5G and Fiber Broadband, etc). In addition to the Cyclical Growth drivers, we highlight Secular Growth trends in Multi Cloud and Edge Cloud, SD WAN, Meraki Cloud Management, Next Gen Security, Application and Infra Analytics, Industrial Internet, etc.

Cisco shareholders receive a 2.97% dividend. The Deutsche Bank target price for the stock is $60, and the Wall Street consensus target is $52.46. The shares closed Tuesday’s trading at $44.06 apiece.

Corning

This was a huge player in the fiber build-outs in the 1990s and may be ready to ramp back up for new deployments. Corning Inc. (NYSE: GLW) is one of the world’s leading innovators in materials science. For more than 160 years, Corning has applied its unparalleled expertise in specialty glass, ceramics and optical physics.

Its products enable diverse industries such as consumer electronics, telecommunications, transportation and life sciences. They include damage-resistant cover glass for smartphones and tablets; precision glass for advanced displays; optical fiber, wireless technologies and connectivity solutions for high-speed communications networks; trusted products that accelerate drug discovery and manufacturing; and emissions-control products for cars, trucks and off-road vehicles.

The Deutsche Bank report noted these positive items:

We assert our conviction on improving fundamentals for Corning, as the growth story in Optical Fiber rollouts for 5G Broadband and Cloud Data Centers, Specialty Materials, and Environmental starts picking up heading into fiscal year 2019+. Displays fundamentals are likely to directionally pickup as well, as we get into a strong holiday season for 4K TVs and the purchasing trend towards larger screen TVs. Auto Glass (The company likely ramping into +20 OEMs; +50 platforms to date) and Pharma Glass are the 2 primary exogenous growth drivers in the model – potential upside catalysts for fiscal year 2020 and beyond.

Corning investors receive a 2.25% dividend. Deutsche Bank has a $38 price target, and the consensus target is $36.59. The shares closed at $30.65 on Tuesday.

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Juniper Networks

This solid technology stock has been on a long roller-coaster ride for investors over the past few years. Juniper Networks Inc. (NYSE: JNPR) is a provider of high-performance network infrastructure to service providers and enterprises.

Key products include IP-based routers for service provider core and edge networks, security solutions and high-end enterprise routing equipment. Juniper’s products support converged data, voice, video and wireless applications across extended networks.

The Deutsche Bank report noted this:

Our investment thesis continues to call for improving fundamentals and modest multiple expansion driven by new design wins and re-accelerating growth for the company’s Cloud, Enterprise and Carrier Switch Routing and Software solutions business, heading into fiscal year 2019.

Shareholders are paid a 2.59% dividend. The $32 Deutsche Bank price target compares with the consensus target of $28.20 and the most recent close at $27.77 a share.

Motorola Solutions

This stock has been on fire and Deutsche Bank feels more upside is possible. Motorola Solutions Inc. (NYSE: MSI) is a provider of communication infrastructure, devices, accessories, software and services. The company operates through two segments.

The Products segment has two product lines: Devices and Systems. The primary customers of the Products segment are government, public safety and first-responder agencies, municipalities and commercial and industrial customers operating private communications networks and manage a mobile workforce.

The Services segment provides a range of service offerings for government, public safety and commercial communication networks. This segment’s product lines include Integration services, Managed & Support services and Integrated Digital Enhanced Network.

The analyst noted this about the company’s prospects:

Investors are likely to see a line of sight into structurally improving mix and margins, plus attractive risk/reward at current levels. This is the core basis of our call for a modest rerating of the company’s multiple – from the “low to mid teens” to the “mid to high teens” over the next few years.

Fundamental positives in the story, in our view, are resilient demand trends in the core Public Safety Devices, Systems, and Managed Services business at US Fed, State and Local agencies, in particular. We continue to highlight Avigilon HD Video Surveillance and Software Command Control as multi-year growth drivers that are yet to be fully discounted in MSI’s trading multiple and in consensus estimates.

Shareholders receive a 1.77% dividend. The Deutsche Bank price objective is $140. The consensus target price is $136.95, and the stock closed on Tuesday at $121.89.

The technology revolution will only continue to grow as consumer and business demand for all Internet of Things and beyond continues to manifest. While very attractive now, these stocks are only suitable for accounts with a higher risk tolerance, as earnings or guidance misses can cause big volatility, and the market is still vulnerable to continued selling going forward.