Morgan Stanley Downgrades Hewlett Packard, Urges Caution On Telecom And Networking Stocks

Morgan Stanley analysts say they're seeing signs of weakness in the networking and enterprise storage sector after the segment was viewed as a "safe place" at the start of 2022.

What Happened: The investment bank is urging investors to remain cautious on stocks in the sector. Morgan Stanley says the Russia-Ukraine war combined with the increase in cost of doing business, along with strong spending in IT over the past year, are making customers “more weary on larger capex orders, causing smaller 2H pipelines to build than expected.”

Analysts have shifted their views on the Telecom & Networking Equipment sector from In-Line to Cautious. Their concern lies with a drop in demand resulting in weaker forward orders, noting anticipated cost increases will likely impact purchase decisions by customers.

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Price Target & Ratings Updates: Morgan Stanley also announced a host of changes to its outlook for the leading stocks in the sector.

Analysts lowered their rating on Hewlett Packard Enterprise Co HPE from Equal-Weight to Underweight and dropped the price target from $17 to $15.

Morgan Stanley reduced the price target for Cisco Systems Inc CSCO from $61 to $59.

For NetApp Inc. NTAP the rating was reduced to Equal-Weight from Overweight, and the price target was adjusted from $102 to $91.

CommScope Holding Company Inc COMM saw its price target drop from $14 to $9, the price target for Ciena Corporation CIEN reduced from $74 to $67 and Zebra Technologies Corp.'s ZBRA price target cut from $470 to $400.

Price Actions: On Tuesday afternoon at publication shares of HPE were down 2.37% at $15.44, CSCO was at $51.75 down 2.15%, NTAP was down 0.84% at $76.47, shares of COMM were down 0.23% at $6.65, CIEN was at $56.29 after falling 1.54%, and ZBRA was down 1.68% at $401.82, according to Benzinga Pro data.