KeyBanc initiates coverage on six IT stocks, rates and 2 more at Buy

Investing.com -- KeyBanc Capital Markets initiated coverage on six companies in the IT infrastructure space, expressing a generally bullish view on long-term demand trends across the sector.

The broker assigned Overweight ratings to Arista Networks (NYSE:ANET), Cisco Systems (NASDAQ:CSCO), and Nutanix (NASDAQ:NTNX) while Dell Technologies (NYSE:DELL), Hewlett Packard Enterprise (NYSE:HPE), and Super Micro Computer (NASDAQ:SMCI) were rated Sector Weight.

According to KeyBanc’s analysis, the total addressable market (TAM) for servers, networking, storage, and cloud software is expected to surpass $400 billion in 2025, supported by hyperscaler spending, enterprise AI, and public cloud adoption.

However, near-term (NT) conditions appear less favorable. “Despite the high-level outlook being positive, from a more micro level, our checks with Value-Added Resellers (VARs) suggest a more cautious NT outlook driven by macro uncertainty, including tariff impact.”

Among the top-rated names, KeyBanc sees Arista reaching $10 billion in revenue by 2026, highlighting the company’s strong position with cloud providers and enterprise customers.

“We believe ANET warrants a premium valuation, where the pullback should be a buying opportunity,” analyst Brandon Nispel said in a note.

Cisco also received a favorable view, with analysts pointing to its healthy product order trends and shift toward a software and subscription revenue mix, which they see as undervalued compared to peers.

Nutanix, meanwhile, was highlighted for its upside potential from VMware displacements and improving margins. “We believe NTNX is critical for future Enterprise cloud migrations,” Nispel said.

“We see consistent execution by management and an improving margin profile, where NTNX’s 40%+ “Rule of 40” results in our positive outlook and premium valuation,” he added.

On the other hand, KeyBanc initiated Dell and SMCI with a Sector Weight rating, as the broker sees the two companies as more exposed to competitive and margin pressures despite strong AI server momentum.

Nispel notes Dell’s valuation appears fair given expected gross margin pressure, while SMCI’s expectations for fiscal 2026 (FY25) look “too high” as the overall end market “appears to be decelerating and getting more competitive.”

HPE was also viewed less favorably due to strategic positioning challenges and limited growth contribution from its GreenLake hybrid cloud offering.