Shares of network equipment makers Cisco Systems Inc and Juniper Networks Inc jumped on Wednesday, helped by buy ratings by Citigroup as well as solid results from smaller rival Adtran and chipmaker Intel Corp .
Citigroup initiated coverage of the companies with buy ratings, saying the equipment makers would benefit from increasing importance of networking spend in IT budgets.
We consider Cisco a core play on the rapid growth in Internet traffic and the adoption of Internet Protocol in new areas such as mobile backhaul and unified datacenter fabric, analyst Richard Gardner said in a note.
Datacenter consolidation and cloud computing will be key catalysts of IT spending during the next upturn, driving the need for faster networks and playing to Cisco's core competency, Gardner said.
Cisco's shares rose 4.16 percent to $19.51 by early afternoon, while Juniper was up 6.11 percent at $24.85.
The report came after Adtran reported stronger-than-expected quarterly results. Strong results from Intel late on Tuesday were also bolstering hopes of a recovery in technology spending, driving up the overall market. The Nasdaq composite index was up 2.81 percent.
Cisco and Juniper report their quarterly results in the coming weeks.
UBS analyst Nikos Theodosopoulos said he expects Juniper's second-quarter revenue to total $767 million. The company forecast a range of $740 million to $780 million.
Solid cost control and higher margin mix to core routers should allow EPS performance of in-line or a penny better than 18 cents, he said in a note on Wednesday. The company forecast second-quarter earnings per share, excluding special items, of 16 cents to 18 cents.
(Reporting by Ritsuko Ando in New York and Mansi Dutta in Bangalore; Editing by Steve Orlofsky)