With spending sailing, it's full speed ahead for these IT Networking picks, Evercore says
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The year ahead for the IT Networking sector looks sunny, Evercore ISI says, with "numerous tailwinds" blowing broadly across the sector.
"The networking space enters 2022 with one of the strongest backdrops in years as all three major verticals should enjoy numerous tailwinds," the firm says, suggesting upside to be had whether you're investing cloud spending, enterprise recovery, or C-band/5G.

Double-digit growth in hyperscale capital expenditures should continue on from 2021, analyst Amit Daryanani and team write; full-year 2021 data-center capex is expected to come in at 22% growth even amid component shortages. And 2022 it should accelerate to about 30%; that's driven by a number of factors, Evercore says, including supply-related push-out of projects into 2022, as well as investments in growth initiatives at Meta Platforms and Amazon.com.
The main beneficiary there is Arista Networks (NYSE:ANET), given its exposure to those two hyperscalers, as well as likely ramp-ups at Google and Apple. But Juniper Networks (NYSE:JNPR) and Cisco Systems (NASDAQ:CSCO) are set to benefit as well.
Meanwhile, a strong capex cycle offers other ways to play the cloud theme, including Ciena (NYSE:CIEN) and Vertiv Holdings (NYSE:VRT), not to mention data-center REITs.
As for enterprise recovery, broader IT spend should be up about 4% in 2022, Evercore says, and within that, networking spend should be 4-5%. Switching should see better than 5% growth, the firm says, while routers will likely be sub 4%.
The firm's survey indicates 90% of decision makers expect to boost spending this year, and much of that should accrued to those best positioned for market recovery: Cisco (CSCO) and F5 Networks (NASDAQ:FFIV). Some exposure to that tailwind can also be gained through Juniper (JNPR) and HP Enterprise (NYSE:HPE), though.
As for wireless, C-band and broader 5G investments should raise service provider spending throughout the year, with the Radio Access Network as the focus - but spending should go beyond the RAN.
"U.S. Service Providers are expecting to grow capex ~8.5% in 2022. This includes both telecommunications service providers who are investing heavily in 5G as well as MSOs where priority is on fiber deployment," Evercore says. And among telecoms, outside RAN there should be spending growth of 4-5% in core technologies. That's set to benefit companies "levered to both the core and access networks," including Ciena (CIEN), Cisco (CSCO) and Juniper (JNPR).
Overall, it says, Cisco Systems (CSCO) is the core large-cap name to own in the IT Networking group, while Arista (ANET) is still the firm's top mid-cap growth stock. But a core re-rating story to own this year comes in F5 (FFIV), which the firm upgraded to Outperform driven by expected strength in security.
Juniper Networks (JNPR) is "poised to show upside given the service provider growth, but need to see more consistent EBIT margins," Evercore says. And it's cut its rating on CommScope (NASDAQ:COMM) to In Line from Outperform, expecting long-term upside but 2022 headwinds in a "difficult supply chain environment, HNS divesture and NEXT initiatives."