Morgan Stanley is sharing insights on how to navigate the telecom and networking equipment stocks as we head into 2025. Despite the overall sector performing well compared to the broader market, equity analysts, led by Meta Marshall, note a split in performance. In a recent research report, Marshall emphasized that stocks considered to be key players in artificial intelligence have seen significant gains this year.
Looking ahead to 2025, Marshall anticipates that companies expected to capture more market share in the AI field and those linked to business operations are likely to experience substantial growth. Conversely, she’s taking a more cautious stance on service providers. The reason? Wall Street appears to have already factored in a recovery in their stock projections.
Given this scenario, Marshall has spotlighted her top picks in the sector as we approach 2025. Nutanix secures her top recommendation for the upcoming year. She points out that the company’s association with enterprise business trends is a good sign for potential growth. “The enterprise sector offers the biggest chance for outperformance from our perspective,” Marshall shared with clients in a comprehensive 94-page report. “Valuations remain reasonable, and there are chances for upward revisions in estimates.” Nutanix is also expected to benefit from heightened business spending and could grab market share from VMware, a division of Dell Technologies. Marshall has upped her price target for Nutanix by $7, setting it at $85, which suggests a 32% rise over Tuesday’s closing price. Her positive outlook is shared by most analysts on Wall Street, according to LSEG, where Nutanix frequently receives a “buy” rating. In 2024, Nutanix shares have surged over 24%, continuing last year’s impressive 83% rise.
Moving on to Arista Networks, Marshall identifies this company as another strong contender in the sector that’s seizing market share, particularly as it aligns with AI developments. Arista has had an impressive year, nearly doubling with about a 95% increase in 2024, similar to its performance in the previous year. Marshall has revised her price target upward to $118 from $102.50, positioning her about $10 above the average analyst consensus for the next 12 months. However, even with the significant growth seen over the past two years, this indicates only about a 3% potential upside from Tuesday’s closing price.
