Computer networking companies provide products for internet connectivity and networking to encompass wireless and Ethernet connections. A number of companies in the sector offer IT security products and systems related to the Internet of Things phenomenon. The proliferation of 5G wireless technology, which requires new network products, has been a positive catalyst for computer networking stocks. As AI is spreading into mainstream usage, it is increasing the need for network and computing resources. Consequently, I expect computer networking stocks to get a significant boost from the AI boom. Also noteworthy is that the valuation of most of the firms in this space are rather reasonable. Here are three of the top computer networking stocks to buy for 2024 for investors looking to benefit from this sector’s growth.
Arista Networks (ANET)
Arista Networks’ (NYSE:ANET) top line jumped 29% YoY to $1.5 billion last quarter. Meanwhile, its net income climbed to $545 million last quarter from $354 million in Q3 of 2022.
In the wake of the Q3 results, Morgan Stanley upgraded its rating on the name to “overweight” from “equal weight.” Further, the bank named ANET stock as the premier avenue for profiting on the boom in the computer networking sector.
Also noteworthy is that Citi recently identified ANET as one of its top picks in the sector.
The shares have a reasonable forward price-earnings ratio of 31.75 times.
Pure Storage (PSTG)
Pure Storage (NYSE:PSTG) develops and markets “unstructured data storage” and “integrated platform” systems. The firm says that its storage architecture enables AI-driven insights to be obtained more quickly. Moreover, its offerings enable data storage systems to be automatically deployed in support of AI products.
Given the huge amount of data needed to support AI products, I believe that the demand for PSTG’s advanced storage products will surge over the longer term.
In the third quarter, the company’s top line climbed 13% versus the same period a year earlier to $763 million, while its subscription services revenue soared 26% YoY to $310 million. Moreover, its net income came in at $70.4 million, versus a loss of $787,000 during Q3 of 2022.
Morgan Stanley recently identified PSTG as one of 32 stocks to which it gives an “overweight” rating and which feature “high free cash flow (and) high earnings per share growth.”
PSTG stock has a low forward price-earnings ratio of 22.4.
Ericsson (ERIC)
AT&T (NYSE:T) recently decided to purchase as much as “$14B of cell tower equipment” from Sweden-based Ericsson (NASDAQ:ERIC) over five years. The deal, which will enable AT&T to implement an commercial-scale open radio access network (Open RAN) was seen as a major win for Ericsson over its longtime rival, Finland-based Nokia (NYSE:NOK).
I believe that the telecom giant’s decision to select Ericsson over Nokia for the contract could enable Ericsson to win many more such deals globally. That’s because companies in other nations often emulate American firms, and AT&T, of course, is one of the largest, most successful telecom companies in the U.S. And with many companies globally deploying 5G technology, an area in which ERIC specializes, ERIC looks poised to grow significantly over the longer term.
The company’s forward price-earnings ratio of 11.5 times is quite attractive.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.