2015 All-America Research Team: Telecom & Networking Equipment, No. 2: Pierre Ferragu

Pierre Ferragu

Sanford C. Bernstein & Co.

First-place appearances: 0

Total appearances: 4

Analyst debut: 2011

Pierre Ferragu“has a great skill of being able to explain complex technologies or industries in an easy-to-understand manner,” one client observes. “He also takes a long-term secular approach to investing that has been very helpful.” The Sanford C. Bernstein & Co. analyst leaps from runner-up to second place. He reports on 11 U.S. telecommunications and networking equipment companies and has covered this space since joining the firm in September 2007. Previously, he worked as a telecoms principal for the Boston Consulting Group. He holds a degree in computer sciences and telecoms from the École Supérieure d’Electricité and earned a doctorate in sociology at the Institut d’Études Politiques de Paris. Splitting his time between London and New York, earlier this year he led his firm to second place on the All-Europe Research Team’s Technology/Hardware lineup. Ferragu, 41, foresees a rebound in information technology outlays. “We believe that IT spending is coming back, and it is currently hidden by a strong dollar depressing international sales. Our fundamental view is that IT spending drives most productivity improvements, in particular in the most advanced economies,” he explains. “Data networking is set to benefit strongly from this recovery, as enterprise networks need a major refresh cycle to introduce automation and other software-defined features.” San Jose, California–based Cisco Systems “is best positioned to benefit from this environment,” the analyst adds, noting that the results of the firm’s most recent CIO survey indicate that the company’s products are among the top purchases the executives plan to make. He likewise projects that telecom equipment investment in the U.S. will recover later this year and grow slowly thereafter. “The competitive landscape has consolidated a lot,” says Ferragu, “granting defensible pricing power and stable market share to leading vendors.” In this group he favors Juniper Networks of Sunnyvale, California. He boosted his rating on the industry-leading networking products provider from market perform to outperform in July 2014. The shares were then up 3.3 percent for that year to date but trailing the S&P 500 by 3.7 percentage points, and the researcher advised that very little of Juniper’s restructuring opportunity was priced in. “Our $30 price target corresponded to a conservative restructuring, on which we now see further upside,” he notes. “We increased our target price in July 2015 to $35, following a good set of quarterly results.” By the middle of last month, the stock had climbed 12.1 percent, to $25.54, against the broad market’s 1 percent decline.