Morgan Stanley has ideas for how to play telecommunications and networking equipment stocks entering 2025. While the broader group outperformed the market, there was still bifurcation, according to equity analysts led by Meta Marshall. Specifically, Marshall wrote in a research report out last week that stocks seen as enablers of artificial intelligence saw notably larger gains this year. For 2025, Marshall said those companies poised to take market share in the AI space and tied to business work should see outsized gains. On the other hand, the analyst said she was more cautious on service providers, given that Wall Street has already priced in a business recovery to their stock outlooks. Given this backdrop, here are her favorite names in the sector heading into 2025: Marshall highlighted Nutanix as her top pick into the new year. She noted the company is tied to enterprise business trends, which offers reason for optimism. “Enterprise presents the biggest opportunity for outperformance in our view,” Marshall told clients in the 94-page report. “Valuations are still reasonable and there are opportunities for positive estimate revisions.” In addition to benefiting from increased business spending, she said Nutanix can take market share from VMware, a unit of Dell Technologies . Marshall raised her price target on Nutanix by $7 to $85, implying 32% upside over Tuesday’s close. She’s in the majority on Wall Street, where most analysts rate Nutanix the equivalent of buy, according to LSEG. NTNX YTD mountain Nutanix in 2024. Shares have climbed more than 24% in 2024, extending last year’s rally of 83%. Arista Networks , meanwhile, is also an AI play in the sector that’s gaining market share, Marshall said. Marshall’s recommendation comes amid a strong year for Arista. The stock has almost doubled, climbing some 95% in 2024, roughly equal to what it gained in 2024. Marshall hiked her price target to $118 from $102.50, putting her about $10 above analysts’ consensus 12-month target. Still, after the big runs seen over the past two years, that only reflects potential upside of about 3% over Tuesday’s close. ANET YTD mountain Arista Networks in 2024.
