Citi starts Juniper, Keysight with Buy ratings, tags Cisco, Arista with Neutral
Chaay_Tee
Citi Research started coverage on U.S. communication equipment and initiated Juniper Networks (NYSE:JNPR) Keysight Technologies (KEYS) with Buy ratings and Arista Networks (ANET) and Cisco Systems (CSCO) with Neutral.
The firm's analysts started Juniper with a Buy rating on enterprise AI appeal and gross margin expansion, and Keysight with Buy on attractive valuation and superior pricing power.
The analysts added that while they like Arista in the datacenter switching market and exposure to generative AI trend, they are worried that if 400G cloud spend slows further in 2023 it may compress the stock multiple â thus rating Arista Neutral. Meanwhile for the Neutral rated Cisco, the analysts like growing software and defensive value appeal, however they see this offset by market share challenges in switch/security.
Juniper:
The firm initiated Juniper with a Buy rating and a $38 price target. Year-to-date Juniper has fallen about -6% compared to the communication equipment peer average of +7%, the analysts think that is beacuse of a sharp 30% drop in adjusted gross orders in the March quarter and uncertainty related to order recovery.
The analysts like the company's enterprise AI strategy and expect another +20% growth in FY23. The firm also likes the room for gross margin expansion following supply chain normalization and software sales mix. In addition the analysts also see an attractive valuation, with the stock trading at 15% discount or at a ~12x FY24 P/E based on the consensus and below the company's five-year median of 14x.
Keysight:
Citi started coverage of Keysight with a Buy rating and a $200 preice target on an attractive valuation. The analysts noted that while year-to-date the stock is down, underperforming the communication equipment peer average, they think, due to a decline in CSG (Communications Solutions Group) sales and worries related to 5G adoption cycle in late innings, the analysts believe investors are overlooking the fact that 5G has multiple waves of deployments and future 6G wireless systems development.
The analysts compare Keysight P/E valuation to a range of higher-margin semiconductor and technology peers and think its superior pricing power and gross margin profile warrants multiple expansion over time. Thus the 10% P/E premium over the 3-year average is justified, the firm added.
Arista:
The firm initiated coverage of Arista with a Neutral rating and a $160 price target. The analysts said that YTD, Arista's shares have outperforming the communication equipment peer average, they think because of optimism related to generative AI and anticipation of positive cloud capex revisions at two major 10%+ sales customers, mainly Microsoft.
The analysts added that while it likes Arista's positioning in the DC switching market within the fastest growing segments of the market cloud/400G and LT exposure to generative AI trend, they are concerned that 400G cloud spend could slow further this year as hyperscalers pivot to prioritize spend towards generative AI.
Cisco:
Citi began coverage of Cisco with a Neutral rating and a $54 price target. Year-to-date the company's shares have risen +6% compared to the communication equipment peer average of +7%, the analysts believe due to defensive nature as a diversified business spanning several customer end markets, lower valuation, and value appeal with a ~3% dividend yield.
The analysts view Cisco as a mixed bag, noting that while they like the company's growing software and diversified sales mix, this is offset by market share challenges in switch/security end markets and lower relative cloud exposure.
More on Arista, Cisco, Juniper amd Keysight

Arista Networks: AI Networking In The New Era
Keysight Technologies: Still Not A Buy Despite A Robust Rally
Cisco Systems: Solid Long-Term Contender
Juniper Networks: Orders Number Not A Huge Concern