With the festive season around the corner, COVID-19 cases are once again surging. According to a CNBC analysis of data from Johns Hopkins University, the United States reported a seven-day average of nearly 95,000 new cases on November 18, up 31% over the past two weeks.
With rising concerns, most organizations are sticking to a hybrid work mode for the winter. This is expected to sustain the demand for 5G. For example, Apple Inc. (AAPL) has decided to push its return to office plan until February. Furthermore, the recently passed $1.2 trillion U.S. infrastructure bill has approximately $65 billion assigned to deliver broadband to unserved and underserved areas of the United States. This is expected to provide a significant boost to the 5G industry. Also, according to the Delaware 5G Infrastructure market study report, the global 5G infrastructure market is expected to grow more than 29% between 2019 -2026.
Given this backdrop, we think it could be wise to bet on fundamentally strong 5G stocks Ciena Corporation (CIEN), A10 Networks, Inc. (ATEN), and Aviat Networks, Inc. (AVNW). They have an overall B (Buy) rating in our proprietary POWR Ratings system.
Ciena Corporation (CIEN)
CIEN in Hanover, Md., is a network strategy and technology company that operates across more than 35 countries. It provides equipment, software, and services that help support the transport, switching, aggregation, service delivery, and management of voice, video, and data traffic on communications networks.
On October 27, 2021, Samsung Electronics Co., Ltd. and CIEN agreed to deliver 5G network solutions to the market. Wonil Rohr, Senior Vice President and Head of Product Strategy, Networks Business at Samsung Electronics, said, “Samsung’s ability to couple our best-in-class 5G solutions with a leader in transport technologies like Ciena will give customers a solution to address this need, and do so with the confidence to scale and evolve their networks to support the future of 5G.”
CIEN’s non-GAAP revenue increased 1.2% year-over-year to $988.10 million for its fiscal third quarter, ended July 31, 2021. Its non-GAAP adjusted gross margin came in at 48.5%, compared to 48.2% in the year-ago period. While its net income increased 67.5% year-over-year to $238.23 million, its EPS was $1.52, up 67% year-over-year.
Analysts expect CIEN’s revenue and EPS to increase 8.2% and 7.9%, respectively, year-over-year to $3.90 billion and $3.15 for its fiscal 2022. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 11.7% in price to close Friday’s trading session at $60.77.
CIEN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CIEN has a B grade for Growth and Value. Within the Technology-Communication/Networking industry, it is ranked #12 of 54 stocks. Click here to see the additional POWR Ratings for Stability, Sentiment, Quality, and Momentum for CIEN.
A10 Networks, Inc. (ATEN)
Networking solutions provider ATEN, San Jose, Calif., serves cloud providers, government organizations, and enterprises in the telecommunications, technology, financial, and gaming industries. Its portfolio consists of six application delivery and security products that include Thunder Application Delivery Controller (ADC), Lightning ADC, and Thunder Threat Protection System (TPS).
On September 7,ATEN enhanced its solutions to help customers meet and accelerate their Zero Trust strategies. As part of a robust Zero Trust architecture, the company’s solutions help security teams eliminate unnecessary risk and become more efficient. With increasing cyberattacks, ATEN could generate increased demand for its solutions.
ATEN’s total revenue increased 15.5% year-over-year to $65.36 million for the third quarter, ended September 30, 2021. Its non-GAAP net income increased 33.1% year-over-year to $13.67 million, while its non-GAAP EPS came in at $0.17, representing a 30.8% year-over-year rise.
For its fiscal year 2021, ATEN’s revenue and EPS are expected to grow 10.1% and 36.4%, respectively, year-over-year to $248.21 million and $0.60. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 75.5% in price to close Friday’s trading session at $16.48.
ATEN’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has an A grade for Quality, and a B grade for Sentiment. ATEN is ranked #5 in the Technology-Communication/Networking industry. Click here to see the additional POWR Ratings for ATEN (Growth, Value, Stability, and Momentum).
Aviat Networks, Inc. (AVNW)
AVNW designs, manufactures, and sells a range of wireless networking products, solutions, and services across North America, Africa, and Europe. The Austin, Tex., company’s products utilize microwave and millimeter-wave technologies to create point-to-point wireless links for short-, medium-, and long-distance interconnections. Also, its products include broadband wireless access base stations and customer premises equipment for fixed and mobile.
On November 18, 2021, AVNW launched MB-XD, the latest enhancement to its WTM 4800 Multi-Band product line, extending the reach of 10 Gbps links over distances up to 20 km to support 5G and rural broadband applications. Peter Smith, AVNW CEO, said, “With our WTM 4800 product line and MB-XD, we have extended our leadership in this extremely important market segment. Our Multi-Band with MB-XD is the only solution that will provide the capacity and the link distances needed to support 5G and the expansion of rural broadband networks.”
For its fiscal first quarter, ended October 1, 2021, AVNW’s total revenues increased 10.4% year-over-year to $73.16 million. The company’s gross margin came in at $26.08 million, up 7.6% year-over-year. Its total current assets were $183.69 million for the period ended October 1, 2021, compared to $170.24 million for the period ended July 2, 2021.
AVNW’s revenue is expected to be $291.74 million in its fiscal year 2022 representing a 6.1% year-over-year rise. The company’s EPS is expected to increase 8.8% year-over-year to $2.46 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 109.7% in price to close Friday’s trading session at $30.13.
It is no surprise that AVNW has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value, Sentiment, and Quality.
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CIEN shares were trading at $61.22 per share on Monday morning, up $0.45 (+0.74%). Year-to-date, CIEN has gained 15.84%, versus a 27.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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