3 Communication Stocks Set to Ride on Fiber & Cloud Thrust

Industry Overview - The Zacks Communication - Components industry is positioned to benefit from strong demand trends and a growing user inclination towards digital innovations, despite facing challenges such as raw material price volatility and geopolitical conflicts [1][4] - Companies like Arista Networks, Harmonic Inc., and Ooma, Inc. are expected to thrive due to rising demand for scalable infrastructure driven by IoT proliferation, fiber densification, cloud adoption, and 5G deployment [1] Industry Description - The industry includes companies providing telecom products and services for scalable network architecture, video solutions, and broadband access equipment, featuring products like small cells, routers, antennas, and various connectivity solutions [2] Future Trends - A shift towards cloud and fiber architecture is anticipated, with firms benefiting from a data-centric approach that enhances cloud experiences and supports the deployment of small cells and 5G networks [3] - The industry is focusing on network convergence, integrating voice, video, and data communications into single networks, which is expected to reduce service delivery costs and expand coverage [5] Demand Dynamics - There is a significant demand for quality networking components as both consumers and enterprises increase network usage, particularly for video content, leading to a strong need for optical solutions [6] Industry Performance - The Zacks Communication - Components industry has outperformed the S&P 500 and the broader Zacks Computer and Technology sector, with a 52.3% increase over the past year compared to 17% and 22.6% for the S&P 500 and sector, respectively [8] - The industry currently trades at a trailing 12-month price-to-book (P/B) ratio of 5.42X, lower than the S&P 500's 6.18X and the sector's 6.64X [9] Key Companies - Arista Networks: Specializes in cloud networking solutions, with a stock gain of 87.2% over the past year and a strong earnings growth outlook [10][11] - Harmonic Inc.: Focuses on video delivery solutions, benefiting from new product launches that simplify fiber upgrades [12][13] - Ooma, Inc.: Offers cloud-based communication solutions, targeting small businesses with user-friendly interfaces and a focus on integrated connectivity [14][15]