B.S., Columbia University; M.S., Stanford University; M.B.A., New York University. Theodosopoulos joined UBS Warburg in 1995. He is the firm's senior communications equipment analyst. Prior to joining UBS, he followed telecom equipment names at Bear Stearns. He has also held technical, marketing and sales positions at AT&T and Bell Laboratories.
Industry Outlook and Style
At the outset of 2000, Nikos Theodosopoulos suspected, as did other wireline equipment analysts, that his industry would grow at a clip faster than its historical 15% to 25% acceleration. By midyear, the industry was on target for revenue growth of 35% in 2000, a figure that exceeds even Theodosopoulos' original estimations.
There have been several drivers of the group's recent growth, says Theodosopoulos: First, traditional service providers, such as AT&T and
, require more equipment for their blossoming digital subscriber line businesses. Second, next-generation long-haul carriers such as
have been building new networks at breakneck speed.
Third, the past year has been a boom time for the fiber-optics components and networking subsectors. In fact, Theodosopoulos was so enraptured by optic technology that last November he added three new optical components companies to his coverage:
. (He had already been tracking
With so much demand for these products, Theodosopoulos feels more positive than ever about revenue and profit prospects for many of the companies he follows. When it comes to picking likely winners -- stocks with the most upside earnings potential relative to his estimates -- he has selected three names. Corning is his star among optic names,
is his Internet protocol networks play and
is his overall favorite. He predicts powerful growth in Nortel's optical and wireless businesses and foresees improving margins company-wide.
Corning wasn't a hard choice, admits the UBS analyst. It's the global leader in optical fiber, which continues to be in high demand. Moreover, according to Theodosopoulos, the company is boosting its performance in the optical components business. He projects earnings per share of $3.25 for 2000 and $4.05 for 2001. That's up from $2.00 in 1999. On the basis of these projections, he easily can imagine the stock, which recently broke $300, climbing to $325 by next summer.
Juniper has already risen 250% this year, and Theodosopoulos believes its ascent will continue. His 12-month price target is $225. The analyst notes that Juniper (whose secondary offering was co-managed by UBS Warburg) has "successfully entered the IP routing market over the past 18 months, cutting into Cisco's market share, which no other company has been able to do. We think Juniper will continue to take away share from the market leader." (Internet protocol routers connect one computer system to another in traditional -- i.e., electrical -- data networking systems. All-optical networking -- which transmits data using beams of light, called photons -- poses a threat to electrical networking systems.)
Theodosopoulos predicts that Nortel will be the absolute standout among telecom equipment stocks in the coming 12 months. He has long rated it a buy. Year-to-date, Nortel has risen more than 60%. Look for unflagging progress in this stock, says the analyst, who foresees a price of $115 by next July based on his projection that earnings per share, which were 51 cents in 1999, will reach 73 cents this year and 96 cents next year. (See our recent story on
Theodosopoulos cites two possible hitches that could cramp the industry's style, though he isn't counting on either materializing. First, the adoption rate of new telecom-related technologies could slow. Second, spending patterns of the telecom service companies could decelerate. "Those are things to keep one's eye on in the next year," warns the analyst.
Favorite stock for next 12 months:
"We like Nortel's strong growth prospects in both its wireless and optical businesses, combined with improving profit margins throughout the company."
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Which stock do you like best?
Geiling and Jungjohann: Corvis