The resurgence of COVID-19 cases due to the rapid spread of the COVID-19 Delta variant is forcing many companies to prolong remote working arrangements. Consequently, the demand for advanced and efficient networking products and solutions is on the rise. In addition, the proliferation of the Internet of Things (IoT), the need for networking security, the use of AR/VR devices with the availability of 5G technology, and the approval of a bipartisan infrastructure bill in Congress (which promises improved internet access) should drive the networking industry’s growth.
Furthermore, the continued digital transformation should keep networking solutions in demand. The global Virtual Networking market size is projected to grow at a 19.4 % CAGR between 2021 – 2026.
We believe that the growing demand for networking solutions should drive the performance of fundamentally sound networking stocks Cisco Systems, Inc. (CSCO), Nokia Corporation (NOK), and Viavi Solutions Inc. (VIAV). Therefore, it could be wise to bet on these stocks now.
Cisco Systems, Inc. (CSCO)
CSCO in San Jose, Calif., designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to communications and information technology worldwide. The company sells its products and services directly and through systems integrators, service providers, resellers, and distributors.
Early this month, CSCO unveiled Vidcast, an asynchronous video messaging solution. Many users are experiencing overloaded schedules and challenges when trying to connect with teams or customers during their virtual meetings. Vidcast’s offering of recorded, instantly shareable videos should help users reduce distractions and eliminate the need to align schedules across time zones, making space for uninterrupted workflow and more thoughtful communication.
On July 15, 2021, Bharti Airtel, India’s premier communications solutions provider, launched advanced connectivity solutions for enterprises based on CSCO’s Cisco Software-Defined Wide Area Networking (SD-WAN) technology to accelerate its digital transformation and allow it to deliver applications to users with greater visibility, security, and performance.
During its fiscal fourth quarter, ended July 31, 2021, CSCO’s total revenue increased 8% year-over-year to $13.13 billion. Its non-GAAP gross profit came in at $8.61 billion, up 9% from the prior-year period. Its non-GAAP operating income is reported to be $4.40 billion for the quarter, representing a 9.5% improvement year-over-year. While its non-GAAP net income increased 4.7% year-over-year to $3.55 billion, its non-GAAP EPS increased 5% to $0.84. The company had $9.18 billion in cash and cash equivalents as of July 31, 2021.
A $0.81 consensus EPS estimate for the current quarter, ending October 31, 2021, represents a 6% improvement year-over-year. CSCO surpassed consensus EPS estimates in each of the trailing four quarters. The $12.98 billion consensus revenue estimate for the current quarter represents an 8.8% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 5.9% rate per annum over the next five years.
The stock has gained 25.4% over the past six months and 7.9% over the past month. It closed yesterday’s trading session at $57.27.
CSCO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Stability. Click here to see the additional ratings for CSCO’s Growth, Value, Sentiment, and Momentum. CSCO is ranked #11 of 56 stocks in the B-rated Technology – Communication/Networking industry.
Nokia Corporation (NOK)
NOK is a Finland-based company in the network and Internet protocol (IP) infrastructure, software, and related services market. The company’s networks segment comprises Mobile Access; Fixed Access; IP Routing; and Optical Networks businesses. NOK serves communications service providers, governments, large enterprises, and consumers.
This month, Vocus, Australia’s leading fiber and network solutions provider, deployed NOK’s solution to set up the 200G optical links between Brisbane and Darwin. NOK’s 1830 Photonic Service Switch (PSS) that upgrades Vocus’ optical network will enable it to provide the latest generation of quality optical services, connecting Darwin to Hypercloud Data Centers, regional locations, and international submarine cables. Both companies hope to address growing data consumption demands, while also delivering ultra-high-speed and reliable experiences for their customers.
NOK provided a private 4.9G/LTE wireless network to U.K.-based Western Power Distribution (WPD) on August 12. Because WPD is testing 4.9G/LTE and future 5G to support the operation of its smart grid, this deployment of a private LTE network will allow supervisory control and data acquisition (SCADA) testing and other mission-critical systems to support its distribution of electricity to the Midlands, Southwest, and Wales. This strong demand from energy companies to capture the transformational benefits of Industry 4.0 should enable NOK to witness further market reach.
For its fiscal second quarter, ended June 30, 2021, NOK’s net sales increased 4.3% year-over-year to €5.31 billion ($6.21 billion). The company’s gross profit has been reported at €2.18 billion ($2.55 billion), up 12.2% from the prior-year period. Its operating profit came in at €484 million ($565.55 billion) for the quarter, representing a 184.7% rise from the prior-year period. NOK’s net profit has been reported at €351 million ($410.14 million), up 254.5% from the prior-year period. Its EPS increased 200% year-over-year to €0.06 ($0.07). As of June 30, 2021, the company had €7.25 billion ($8.47 billion) in cash and cash equivalents. Analysts expect NOK’s EPS to improve 32.1% year-over-year in the current quarter, ending September 30, 2021, to $0.08. NOK surpassed the Street’s EPS estimates in three of the trailing four quarters. The $6.39 billion consensus revenue estimate for the current quarter represents a 3.4% year-over-year improvement. The stock’s EPS is expected to grow at a 16.5% rate per annum over the next five years.
The stock has gained 44.7% over the past six months and 5.2% over the past month. It ended yesterday’s trading session at $5.89.
NOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock also has an A grade for Sentiment, and a B grade for Value.
We also have graded NOK for Growth, Quality, Momentum, and Stability. Click here to access all NOK’s ratings. NOK is ranked #19 in the Technology – Communication/Networking industry.
Viavi Solutions Inc. (VIAV)
VIAV provides network test, monitoring, and assurance solutions to communications service providers (CSPs), enterprises, network equipment manufacturers, government, civil, military, and avionics customers worldwide. The company operates through three segments: Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP). VIAV is based in Milpitas, Calif.
On August 17, VIAV collaborated with technology supplier Picocom to provide complete test solutions for validation of Open RAN based station components, including chips, physical layers, and protocol stack software, for small cell 5G networks compliant with O-RAN standards to address the complex and diversified needs of many different industry use cases. The companies hope to provide high-quality and stable small cell networks and help usher in 5G industry applications.
VIAV introduced the VIAVI AVX-10K Flight Line Test Set on June 23. It offers an intuitive user interface to help technicians work more efficiently by streamlining setup, testing, and reporting. Able to operate remotely with the VIAVI Solutions Mobile Tech App, its cloud based VIAVI StrataSync system provides a central location for securely storing, viewing, and sharing test data. VIAV expects to see high demand for this test set in the coming months.
VIAV’s revenue for its fiscal fourth quarter, ended July 3, 2021, increased 16.6% year-over-year to $310.90 million. The company’s non-GAAP gross profit came in at $192.70 million, up 17.2% from the year-ago period. Its non-GAAP operating income has been reported at $64.70 million for the quarter, representing a 23.7% year-over-year improvement. VIAV’s non-GAAP net income was $52.80 million, up 29.4% from the prior-year period. Its non-GAAP EPS increased 22.2% year-over-year to $0.22. As of July 3, 2021, the company had $697.80 million in cash and cash equivalents.
A $310.77 million consensus revenue estimate for the current quarter, ending September 30, 2021, represents a 9.2% improvement from the prior-year period. VIAV surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 15% rate per annum over the next five years. VIAV has gained 17.4% over the past nine months and closed yesterday’s trading session at $15.98.
It’s no surprise that VIAV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Value, Growth, Stability, and Quality.
Click here to see the additional ratings for VIAV’s Momentum and Sentiment. Again, VIAV is ranked #1 in the Technology – Communication/Networking industry.
CSCO shares were trading at $57.72 per share on Friday morning, up $0.45 (+0.79%). Year-to-date, CSCO has gained 31.87%, versus a 19.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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