Light Reading
Equipment stocks are on fire, fueled by rising earnings forecasts; LR Index is up 18% in 2004

En Fuego!

Light Reading
News Analysis
Light Reading
1/16/2004
50%
50%

Telecom equipment stocks rocketed upwards on Friday as earnings from Juniper Networks Inc. (Nasdaq: JNPR) confirmed that telecom companies are making new investments in network upgrades.

Juniper, which last night blew past analyst revenue and profit estimates, rose $5.36 (23%) to $28.19 in morning trading (see Juniper Confidently Carries Q4). Other companies in the IP router space, such as Cisco Systems Inc. (Nasdaq: CSCO) and Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), followed suit. Cisco was up $1.03 to (3.8%) to $28.19; and Avici rose $2.32 (13.3%) to $19.73.

The Light Reading Index of important telecom equipment and components suppliers was up $8.06 (3.74%) to $223.43. The Index started the year at $188.86 and is already up 18 percent in 2004.

Several factors driving the buying interest include:

  • The broader markets have been going up and investors have been in a buying mood

  • Major carriers have recently announced plans to buy new equipment, especially for packet-based networks. And investors have been catching up to the packet convergence theme, outlined here by Geoff Bennett, chief technologist at Light Reading's independent research group, Heavy Reading, last September (see Incumbents Converge on Convergence).

  • Many shares in the telecom market have been the target of short-sellers, who borrow stock and sell it in the hopes that the price will go down. When short-sellers get caught in a rising market, they are often forced to buy shares to cover the ones they have sold short, further fueling the rise.

  • Investors have been speculating that the cycle in the telecom market has bottomed and carrier financial health will improve. Indeed, as spotted in December by Light Reading Insider, there's plenty of evidence that the capital spending cycle has bottomed (see Carrier Capex Set for 2004 Rebound and Packets Key to Capex Comeback). But the question of how much new spending carriers will do hangs on their ability to generate new revenue from services.
This sounds all good. But despite the animal spirits and optimism in the sector, some investment professionals are wary that the stocks are once again being bid up beyond reasonable valuations.

“They could probably go a lot higher but I would not be buying them here,” says Erik Weir, president and CEO of Weir Capital Management. “I think a lot of the reason they are going up is because people were short-selling them."

Weir points out that Juniper is valued at roughly 111 times this year’s earnings estimates.

"The problem is that it's rational and warranted in a small number of cases, but it's not rational and warranted across the board," said Steve Kamman, analyst with CIBC World Markets. "The concern this year is we're still looking at single-digit capex growth and single-digit enterprise IT growth, so it's going to be tough to make double-digit growth across the board."

In a report issued this morning, Kamman raised Juniper's 2004 revenue estimate to $903 million from $800 million and his 2004 EPS forecast to $0.33 from $0.24. For the rest of the year, he says it's likely that investment success will be based on a narrower group of winners capturing the capex dollars in new equipment upgrades.

"The difference between the bubble years and the recovery is they're now spending in a very focused manner, and you're either on board the right train or you're not," says Kamman.

The game will be won or lost based on whether 2004 earnings beat expectations. Earnings estimates in the group may have room for further upgrades from analysts who have fallen behind.

Prior to the earnings call, analyst consensus profit estimates for Juniper were $0.24 cents per share in 2004, according to Thomson Financial/Lancer Analytics. Today, following rising forecasts, analysts now see $0.26 cents in 2004, says Thomson.

But Weir thinks that’s a risky gamble.

”You either made it at the bottom or you didn’t” says Weir. “But it's no surprise to see some of them take estimates higher.”

— R. Scott Raynovich, US Editor, Light Reading

(28)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 3   >   >>
Scott Raynovich
50%
50%
Scott Raynovich,
User Rank: Light Beer
12/5/2012 | 2:40:27 AM
re: En Fuego!
Hmm, funny how folks never show up for positive market stories. Wat's up Wid dat?
Scott Raynovich
50%
50%
Scott Raynovich,
User Rank: Light Beer
12/5/2012 | 2:40:26 AM
re: En Fuego!
Yes, quite the exuberant day.
rzerockzeron
50%
50%
rzerockzeron,
User Rank: Light Beer
12/5/2012 | 2:40:26 AM
re: En Fuego!
...too busy counting the ways on how to spend this newfound (virtual) cash.

RZ
fiber_r_us
50%
50%
fiber_r_us,
User Rank: Light Beer
12/5/2012 | 2:40:25 AM
re: En Fuego!
Yeah! Just a few hundred more days like that, and I can be back in the black again!
newbee2002
50%
50%
newbee2002,
User Rank: Light Beer
12/5/2012 | 2:40:25 AM
re: En Fuego!
Cheers!
jamesbond
50%
50%
jamesbond,
User Rank: Light Beer
12/5/2012 | 2:40:23 AM
re: En Fuego!
Maybe they are busy selling jnpr stock before
it goes back to under 10.
bonnyman
50%
50%
bonnyman,
User Rank: Light Beer
12/5/2012 | 2:40:21 AM
re: En Fuego!
Corning shares were up also today on good news from Standard & Poors that S&P was upgrading its' outlook on Corning from negative to stable.

Unfortunately, for us telecom folks, that was driven by Corning's other businesses, not fiber. Here's a quote from S&P out of the Wall Street Journal:

" Telecommunications industry customers are restraining capital spending, and recovery is not expected before 2005, although quarter-to-quarter trends are likely to be volatile. Prospects are brighter in the non-telecommunication business lines--the liquid crystal display (LCD) and environmental segments in particular. For example, in LCD flat-glass segment sales (televisions and monitors), which have grown for eight sequential quarters (7% in the third quarter), prices are declining, but growth rates and cost reductions have exceeded price declines. Corning has the No. 1 position in larger LCD panels, which require a disproportionately larger piece of glass than a smaller use. The company's environmental-focused businesses are tied to automotive production but should benefit from increasing regulatory requirements over time."

The Wall Street Journal link is:
http://online.wsj.com/article/...
but a paid subscription is required.

A.B.
OptixCal
50%
50%
OptixCal,
User Rank: Light Beer
12/5/2012 | 2:40:20 AM
re: En Fuego!
...virtual cash? Hmmm, you get theat when you have a virtual job, I guess.
newbee2002
50%
50%
newbee2002,
User Rank: Light Beer
12/5/2012 | 2:40:14 AM
re: En Fuego!
Sorry to hear that. I missed out almost entirely the bull market of the 90s, so didn't lose much, or any. Barely I had an opportunity to observe the market euphoria in early 2000, and it was fun :-)
BobbyMax
50%
50%
BobbyMax,
User Rank: Light Beer
12/5/2012 | 2:40:12 AM
re: En Fuego!
First of all a lot of people have lost money by investing in Cisco and Juniper. Some have lost their lifetime savings by investing in Lucent, Xerox, 3Com and thousands of other companies.

I believe the same hype is being created by analysts and company surrogates. Over 90% people who invested in networking and high-tech companies have lost all their investments. Cisco stock came down all the way down to $11 from a high of $66. Same is true of Juniper and Avici.

Capex would continue to decline at least for the next 6 years. All RBOCs are under huge debt. Most are mismanaged. Extrely high salaries and stock options are very common.

Strangely enough when the stock prices are quoted, they never mentioned how high/low it was four years ago. In other words, thereis no reference pointed. The WAll Street Analysts supress vital and useful information. Cisco, for example, was acquiring companies at an unprecedented for the sole purpose of enhancing the stock prices. Many other compoanies started doing the same thing. This and other reasons caused the market to collapse. The moral is dishonesty does not pay.

There is no evidence that Cisco,Juniper or Avici can sustain continous growth. It is surprising that we are experiencing the bubble again. The analysts and the greedy CEOs.
Page 1 / 3   >   >>
Flash Poll
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
LRTV Huawei Video Resource Center
The Evolving Role of Hybrid Video for Competitive Success

7|4|14   |   4:09   |   (0) comments


At Huawei's Global Analysts Summit in Shenzhen, China, Steven C. Hawley from TV Strategies speaks to us about the evolving role of hybrid video for competitive success.
LRTV Huawei Video Resource Center
How CSPs Leverage Big Data in the Digital Economy

7|4|14   |   4:48   |   (2) comments


Justin van der Lande from Analysys Mason shares with us his views on how telecom operators can leverage customer asset monetization with big data. His discusses the current status of big data applications and the challenges and opportunities for telecom operators in the digital economy era.
LRTV Huawei Video Resource Center
Accelerator for Digital Business Future Oriented BSS

7|4|14   |   3:08   |   (0) comments


Mobile and internet are becoming intertwined; IT and CT are integrating; and leading CSPs have begun to transform to information service and entertainment providers. How should the BSS system evolve to enable this transformation? Karl Whitelock, an analyst at Frost & Sullivan, shares his views.
LRTV Huawei Video Resource Center
Orange Tunisia Discusses Multi-Band Antenna With EasyRET Solution

7|4|14   |   2:45   |   (0) comments


As new site acquisition becomes more difficult, Orange Tunisia has requested multi-band antenna to support UMTS and LTE innovation. Some things considered include reducing the cost of antenna maintenance and having high reliability antenna and EasyRET solution.
LRTV Huawei Video Resource Center
How Telefonica Spain Considers Antenna Selection for LTE Network Deployment

7|4|14   |   2:19   |   (0) comments


Tony Conlan, Global CTO of RAN, Telefonica, shares his opinion on antennas in LTE network deployment: Tower space is the premier requirement on antennas; reliability is important to reduce OPEX; and EasyRET solution will be helpful for antenna maintenance.
LRTV Huawei Video Resource Center
dtac Thailand: Multi-band Antenna & Capacity Solution for a Better MBB Experience

7|3|14   |   3:45   |   (0) comments


With the development of LTE, tower space and load are limited for new antenna, but users' capacity requirements are growing fast. To provide a better MBB experience, Panya Vechbanyongratana from dtac Thailand shared his experiences and antenna requirements.
LRTV Documentaries
BTE Panel: Network of the Future

7|2|14   |   1:00:57   |   (0) comments


Full-length video of the ATIS Panel Discussion: 'How Far Away Is the Network of the Future & What Does It Look Like?' from the Big Telecom Event (BTE) in Chicago.
LRTV Custom TV
Redknee Supports BH Telecom With Redknee Unified

7|2|14   |   6.14   |   (0) comments


Lucas Skoczkowski, CEO of Redknee, and Amir Orucevic, Director BH Mobile, discuss how the benefits of the Redknee Unified suite of products provide BH Telecom with innovation and leadership in the market, with the flexibility to launch services faster to the market, provide new and compelling promotions and pricing models, and combine services in order to drive ...
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
October 29, 2014, New York City
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
Infographics
Allot's latest MobileTrends Charging Report shows that value-based pricing plans are up from 35% in 2011 to 85% in 2014.
Today's Cartoon
Vacation Special Caption Competition Click Here
Hot Topics
Microsoft to Axe 12,500 Ex-Nokia Employees
Sarah Reedy, Senior Editor, 7/17/2014
GM: 10 Car Models on Road With AT&T's LTE
Dan Jones, Mobile Editor, 7/18/2014
Have IBM & Apple Partnered Their Way to Cloud Leadership?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/18/2014
The Municipal Menace?
Jason Meyers, Senior Editor, Utility Communications/IoT, 7/22/2014
FiOS: Slower Sub Growth, Faster Upload Speeds
Alan Breznick, Cable/Video Practice Leader, 7/22/2014
Like Us on Facebook
Twitter Feed