Morgan Stanley communications equipment analyst Ehud Gelblum, who just yesterday warned of tough times for communications equipment makers, today writes that AT&T’s (T) calling off its bid for T-Mobile USA last night removes one of the main reasons he expressed caution yesterday.
“With the T/TMO deal now officially called off, we believe a major overhang to spending is removed and sentiment in the group could quickly turn positive,” writes Gelblum.
“Therefore, all else being equal, we now believe names exposed to AT&T such as Overweight-rated Juniper Networks (JNPR), Adtran (ADTN), and Equal Weight-rated Ciena (CIEN), could rally into earnings as money pours into the sector on the hope that spending resumes sooner than it would have. Note that sector valuations are also approaching 3-year lows.”
Nevertheless, Gelblum sticks with his overall “cautious” view on the industry, writing that the “actual fundamentals” may take longer to turn for networking than does the sentiment in the stocks.
The stocks are really rocketing today, in fact: Ciena is up 95 cents, or 9%, at $11.33; Adtran is up $2.66, or almost 10%, at $30.50; and Juniper is up $1.57, almost 9%, at $19.69.
Even Calix (CALX), which Gelblum cut to Hold yesterday, is today up 33 cents, or almost 6%, at $5.95.
Shares of Cisco Systems (CSCO) are also up, though more modestly, rising 65 cents, or almost 4%, to $18.34.
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