Jefferies re-figures networking equippers best positioned to handle supply chain storm
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A look at the supply chain issues plaguing technology firms has Jefferies picking telecom and networking equipment companies best positioned to weather the difficulties.
"Supply constraints are here to stay in 2022 (and likely into 2023)," analyst George Notter and team write.
End demand in communications equipment is strong, they say, and meanwhile: "More significant fab capacity is not expected to come online until 2024 leaving a rebalancing of supply and demand as the only reasonable outcome eliminating supply constraints â which appears unlikely given new demand spurred by increasing adoption of technology/computing capabilities across many non-tech industries."
The firm used a combination of quantitative and subjective factors to assess risks to individual companies - looking at inventory and purchase commitments, and comparing them to next-12-months cost of goods sold.
Particularly well positioned on those metrics with regard to the risk are Arista Networks (ANET
-2.1%), Harmonic (HLIT
-1.6%) and Juniper Networks (JNPR
+0.7%), Notter says.
Layering in some more holistic factors - including companies' size/bargaining power, software/services revenue mix and pricing power - it sees best positioning for Cisco Systems (CSCO
+0.3%) and Motorola Solutions (MSI
+0.2%) as well as Arista and Juniper.
Also, looking at the best capital expenditure environment in 20 years leads it to give a favorable view to Calix (CALX
-2.3%), Ciena (CIEN
-0.3%) and Lumentum (LITE
+0.6%) as well as Juniper.
Conversely, smaller equipment suppliers have seen a disproportionate hit from supply chain issues, and that's led the firm to cut Airspan Networks Holdings (MIMO) to Hold. MIMO is down 13.8% Friday.
It's also reduced its price target on CalAmp (CAMP
-2.1%) to $13/share - which still suggests 82% upside in the stock.
Cisco this month was the subject of a downgrade at Wells Fargo, seeing increasing competition from equipment rivals.