We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Increasing focus on cloud computing, network security, big data and cloud storage is expected to boost the performance of the Zacks Computer - Networking industry participants. Accelerated deployment of 5G is driving the proliferation of the Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS), Augmented Reality/Virtual Reality (AR/VR) devices and 5G smartphones, calling for solid networking infrastructure.
This spurred demand for networking products, favoring the prospects of prominent industry players like Cisco, Extreme Networks and RADCOM Ltd.. However, negative impacts stemming from the lingering supply chain disruptions and component shortages will likely be a concern in the near term. Weak global economic conditions and rising inflation are likely to act as additional headwinds.
Industry Description
The Zacks Computer - Networking industry comprises companies that offer networking and Internet-connected products, including wireless (WiFi and Long-Term Evolution or LTE), Ethernet and powerline, focusing on dependability and ease of use. The products are available in numerous configurations to cater to the changing requirements of consumers in each geographic territory where it operates for smooth network connectivity and broadband access.
Some industry players also provide mission-critical IoT solutions and network security services to help clients build next-generation connected products and implement and manage critical communications infrastructures in demanding environments with enhanced levels of safety. Focus on developing IoT sensors, drones and wearables amid increasing demand for cloud computing-based contact tracing applications is driving the industry
4 Trends Influencing the Industry's Future
Rapid Deployment of 5G to Boost Growth Prospects: Adopting a hybrid/flexible work model has triggered demand for network-intensive applications like video conferencing and cloud services. This is anticipated to accelerate 5G deployment through 2023 and beyond. The impending 5G boom will likely propel the industry to newer heights. The success of 5G technology hinges on substantial investments to upgrade infrastructure in the core fiber backhaul network to support growth in data services.
More efforts to develop smart connected homes, hospitals, factories, buildings, cities and self-driving vehicles bode well for industry players. These firms invest heavily in LTE, broadband and fiber to provide additional capacity and improve Internet and wireless networks. These initiatives hold promise.
The Uptick in Wi-Fi 6 Networking to Drive Momentum: Brisk technological advancement, dynamic products, high-speed connectivity, low latency and evolving industry standards define the Computer Networking industry. The growing clout of the latest Wi-Fi 6-compliant residential gateways, Wi-Fi routers, set-top boxes and wireless range extenders is a testament to the same. Wi-Fi 6 — the latest 802.11ax wireless standard — is estimated to offer 30% faster network speed over 802.11ac (Wi-Fi 5). This is anticipated to bolster the industry participants’ top line.
Innovation in Networking Technologies is Opening New Business Avenues: Growing clout of Smart Home and Internet-connected products such as Smart TVs, game consoles, High Definition (HD) streaming players, security cameras, thermostats and smoke detectors continue to drive innovations in networking. The rapid proliferation of IoT, the increasing popularity of smart connected devices and the growing adoption of cloud computing in network security fuel the demand for an efficient network support infrastructure.
The advancements in AI and ML and the high adoption of cloud applications hold immense potential for companies in the industry. Enterprises are striving to manage fixed and wireless devices in a secured infrastructure. To address the demand, industry firms are driving innovation in networking technologies, including network virtualization and Software-Defined Networking (SDN), which favors growth prospects.
Increase in IT Spending Amid Economic Turmoil Bodes Well: Per a Gartner report, worldwide IT spending is expected to increase 4.3% in 2023 from 2022 levels and reach around $4.7 trillion. The report added that despite macroeconomic headwinds, enterprises are increasing spending on digital business initiatives, which bodes well for industry participants.
Gartner states that the software segment is likely to witness double-digit growth in the current year. However, consumers are deferring spending on the purchase of devices, which will likely affect the IT spending growth to an extent in 2023. Gartner expects the devices segment to decline by nearly 8.6% in 2023.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Computer - Networking Industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank of 28, positioning it in the top 11% of more than 252 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries results from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are optimistic about this group’s earnings growth potential. The industry’s earnings estimate for 2023 has improved to earnings of $3.09 against a loss of $2.95 as of Jan 31, 2023.
Before we present a few stocks that you may want to consider for your portfolio, considering bright prospects, let us look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms both S&P 500 & the Sector
The Zacks Computer – Networking industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The industry is up 16% over this period compared with the broader sector’s gain of 13.9%. The S&P 500 has gained 6.9% over the same time frame.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio (P/E), which is a common multiple for valuing Computer – Networking stocks, we see that the industry is currently trading at 15.58X compared with the S&P 500’s 19.10X. It is also below the sector’s forward-12-month P/E of 23.93X.
In the past five years, the industry has traded as high as 20.33X and as low as 12.56X, with media being at 15.64X.
3 Computer - Networking Stocks to Keep an Eye On
Extreme Networks: Based in Morrisville, NC, Extreme Networks provides next-generation switching solutions that cater to the increasing requirements of enterprise local area networks or LAN, internet service and content providers.
Higher deployment of 5G base stations on accelerated demand for 5G networking is expected to boost growth prospects. Acquisitions like Ipanema bode well in the long haul. Earlier in the year, the company unveiled the ExtremeCloud Edge platform that covers public to private to edge cloud deployments and aids customers in lowering operating costs related to the management of many cloud platforms. The company expects new product innovations like universal hardware, end-to-end cloud management and enhanced AI to boost growth prospects.
The Zacks Consensus Estimate for fiscal 2024 is pegged at $1.55 per share, indicating an increase of 42.2% year over year. Shares have increased 99.6% in the past year.
RADCOM: This Tel Aviv, Israel-based company specializes in providing cloud-native, automated service assurance offerings for telecommunication operators for 5G networks.
The company recently reported its second-quarter 2023 results, with revenues totaling $12.4 million, up 11% on a year-over-year basis. The company recently unveiled a 5G assurance solution on Google Cloud. The company noted that availability on Google Cloud will extend availability of 5G assurance solutions to clients to help them streamline 5G rollouts.
RADCOM carries a Zacks Rank #1. The Zacks Consensus Estimate for the company’s 2023 earnings is pegged at 39 cents per share, up 30% in the past 60 days.
Cisco: Headquartered in San Jose, CA, Cisco provides performance management, cybersecurity and DDoS protection solutions. Cisco is riding on the growing demand for its security products. Its security portfolio benefits from the launch of new data loss prevention, firewall and zero trust capabilities. Zero Trust portfolio is riding on strong demand for its Duo offering. Optimized application experience is benefiting from strong demand for ThousandEyes.
Its investments across the security business, focusing on cloud-based and AI-driven offerings, are expected to drive growth. Expanding growth opportunities for low-power-consuming technologies, including IoT, Silicon One and Power over Ethernet, bodes well for Cisco.
Cisco carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at $4.04 per share. Shares have increased 16.9% in the past year.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights Cisco, Extreme Networks and RADCOM
For Immediate Release
Chicago, IL – August 23, 2023 – Today, Zacks Equity Research discusses Cisco (CSCO - Free Report) , Extreme Networks (EXTR - Free Report) and RADCOM Ltd. (RDCM - Free Report) .
Industry: Computer Networking
Link: https://www.zacks.com/commentary/2139015/3-networking-stocks-to-watch-for-from-a-prospering-industry
Increasing focus on cloud computing, network security, big data and cloud storage is expected to boost the performance of the Zacks Computer - Networking industry participants. Accelerated deployment of 5G is driving the proliferation of the Internet of Things (IoT), Advanced Driver Assistance Systems (ADAS), Augmented Reality/Virtual Reality (AR/VR) devices and 5G smartphones, calling for solid networking infrastructure.
This spurred demand for networking products, favoring the prospects of prominent industry players like Cisco, Extreme Networks and RADCOM Ltd.. However, negative impacts stemming from the lingering supply chain disruptions and component shortages will likely be a concern in the near term. Weak global economic conditions and rising inflation are likely to act as additional headwinds.
Industry Description
The Zacks Computer - Networking industry comprises companies that offer networking and Internet-connected products, including wireless (WiFi and Long-Term Evolution or LTE), Ethernet and powerline, focusing on dependability and ease of use. The products are available in numerous configurations to cater to the changing requirements of consumers in each geographic territory where it operates for smooth network connectivity and broadband access.
Some industry players also provide mission-critical IoT solutions and network security services to help clients build next-generation connected products and implement and manage critical communications infrastructures in demanding environments with enhanced levels of safety. Focus on developing IoT sensors, drones and wearables amid increasing demand for cloud computing-based contact tracing applications is driving the industry
4 Trends Influencing the Industry's Future
Rapid Deployment of 5G to Boost Growth Prospects: Adopting a hybrid/flexible work model has triggered demand for network-intensive applications like video conferencing and cloud services. This is anticipated to accelerate 5G deployment through 2023 and beyond. The impending 5G boom will likely propel the industry to newer heights. The success of 5G technology hinges on substantial investments to upgrade infrastructure in the core fiber backhaul network to support growth in data services.
More efforts to develop smart connected homes, hospitals, factories, buildings, cities and self-driving vehicles bode well for industry players. These firms invest heavily in LTE, broadband and fiber to provide additional capacity and improve Internet and wireless networks. These initiatives hold promise.
The Uptick in Wi-Fi 6 Networking to Drive Momentum: Brisk technological advancement, dynamic products, high-speed connectivity, low latency and evolving industry standards define the Computer Networking industry. The growing clout of the latest Wi-Fi 6-compliant residential gateways, Wi-Fi routers, set-top boxes and wireless range extenders is a testament to the same. Wi-Fi 6 — the latest 802.11ax wireless standard — is estimated to offer 30% faster network speed over 802.11ac (Wi-Fi 5). This is anticipated to bolster the industry participants’ top line.
Innovation in Networking Technologies is Opening New Business Avenues: Growing clout of Smart Home and Internet-connected products such as Smart TVs, game consoles, High Definition (HD) streaming players, security cameras, thermostats and smoke detectors continue to drive innovations in networking. The rapid proliferation of IoT, the increasing popularity of smart connected devices and the growing adoption of cloud computing in network security fuel the demand for an efficient network support infrastructure.
The advancements in AI and ML and the high adoption of cloud applications hold immense potential for companies in the industry. Enterprises are striving to manage fixed and wireless devices in a secured infrastructure. To address the demand, industry firms are driving innovation in networking technologies, including network virtualization and Software-Defined Networking (SDN), which favors growth prospects.
Increase in IT Spending Amid Economic Turmoil Bodes Well: Per a Gartner report, worldwide IT spending is expected to increase 4.3% in 2023 from 2022 levels and reach around $4.7 trillion. The report added that despite macroeconomic headwinds, enterprises are increasing spending on digital business initiatives, which bodes well for industry participants.
Gartner states that the software segment is likely to witness double-digit growth in the current year. However, consumers are deferring spending on the purchase of devices, which will likely affect the IT spending growth to an extent in 2023. Gartner expects the devices segment to decline by nearly 8.6% in 2023.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Computer - Networking Industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank of 28, positioning it in the top 11% of more than 252 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries results from a positive aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are optimistic about this group’s earnings growth potential. The industry’s earnings estimate for 2023 has improved to earnings of $3.09 against a loss of $2.95 as of Jan 31, 2023.
Before we present a few stocks that you may want to consider for your portfolio, considering bright prospects, let us look at the industry’s recent stock-market performance and valuation picture.
Industry Outperforms both S&P 500 & the Sector
The Zacks Computer – Networking industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The industry is up 16% over this period compared with the broader sector’s gain of 13.9%. The S&P 500 has gained 6.9% over the same time frame.
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings ratio (P/E), which is a common multiple for valuing Computer – Networking stocks, we see that the industry is currently trading at 15.58X compared with the S&P 500’s 19.10X. It is also below the sector’s forward-12-month P/E of 23.93X.
In the past five years, the industry has traded as high as 20.33X and as low as 12.56X, with media being at 15.64X.
3 Computer - Networking Stocks to Keep an Eye On
Extreme Networks: Based in Morrisville, NC, Extreme Networks provides next-generation switching solutions that cater to the increasing requirements of enterprise local area networks or LAN, internet service and content providers.
Higher deployment of 5G base stations on accelerated demand for 5G networking is expected to boost growth prospects. Acquisitions like Ipanema bode well in the long haul. Earlier in the year, the company unveiled the ExtremeCloud Edge platform that covers public to private to edge cloud deployments and aids customers in lowering operating costs related to the management of many cloud platforms. The company expects new product innovations like universal hardware, end-to-end cloud management and enhanced AI to boost growth prospects.
Extreme Networks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for fiscal 2024 is pegged at $1.55 per share, indicating an increase of 42.2% year over year. Shares have increased 99.6% in the past year.
RADCOM: This Tel Aviv, Israel-based company specializes in providing cloud-native, automated service assurance offerings for telecommunication operators for 5G networks.
The company recently reported its second-quarter 2023 results, with revenues totaling $12.4 million, up 11% on a year-over-year basis. The company recently unveiled a 5G assurance solution on Google Cloud. The company noted that availability on Google Cloud will extend availability of 5G assurance solutions to clients to help them streamline 5G rollouts.
RADCOM carries a Zacks Rank #1. The Zacks Consensus Estimate for the company’s 2023 earnings is pegged at 39 cents per share, up 30% in the past 60 days.
Cisco: Headquartered in San Jose, CA, Cisco provides performance management, cybersecurity and DDoS protection solutions. Cisco is riding on the growing demand for its security products. Its security portfolio benefits from the launch of new data loss prevention, firewall and zero trust capabilities. Zero Trust portfolio is riding on strong demand for its Duo offering. Optimized application experience is benefiting from strong demand for ThousandEyes.
Its investments across the security business, focusing on cloud-based and AI-driven offerings, are expected to drive growth. Expanding growth opportunities for low-power-consuming technologies, including IoT, Silicon One and Power over Ethernet, bodes well for Cisco.
Cisco carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at $4.04 per share. Shares have increased 16.9% in the past year.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.