Quietly, Telecom System Builders Emerge As Leaders

While makers and sellers of smartphones and tablet PCs are glamour brands, some of the companies that make the equipment to make those devices work are quietly turning into attractive investment choices. The telecom infrastructure industry group remains in the bottom half of IBD’s rankings, yet it’s made a rapid advance over the past few weeks as its leaders shape attractive charts. The group ranked No. 107 in IBD Weekly, up from 147 four weeks ago. Three top-rated stocks in the group are of particular interest because they have topped or are approaching buy points. The most critical to watch now is Broadsoft ( BSFT ), which rose above the 42.16 buy point of a base-on-base pattern Monday in active trading. For the stock, it’s been an impressive rebound after the May 2 earnings announcement rattled shares. Although it beat profit expectations, Broadsoft projected its current-quarter operating EPS below views . Shares fell as much as 11% on the news, but they quickly recovered and continued working on the base until Monday’s breakout. The company helps big telecoms deliver unified communications, integrating voice, video and text messaging and other forms into a single stream. Dycom ( DY ), which is on the IBD 50 , is trying to break out past a 73.28 buy point. With the earnings report due Tuesday after the close, it could be the next telecom infrastructure stock to make a move. Analysts expect Dycom to earn 74 cents a share and to report sales of $597.8 million. Dycom has a nearly perfect EPS Rating of 98. In a report Monday from D.A. Davidson, the research firm said, “ AT&T ( T ), Verizon Communications ( VZ ) and other presumed Dycom customers have announced plans for ongoing major fiber expansion, suggesting near-term growth in wireline construction activity will continue to be robust.” Those same trends figure to aid other telecom infrastructure companies. Indeed, capital spending by the major telecoms drives much of the infrastructure industry’s fortunes. CommScope Holding ( COMM ) is forming a cup-with-handle base with a buy point at 31.80. The Hickory, N.C.-based company helps telecoms design, build and maintain wired and wireless networks. Ubiquiti Networks ( UBNT ) broke out of a base May 6 after it reported earnings. Ubiquiti, which builds wireless networks around the world, beat estimates. Earnings and sales growth have accelerated the past few quarters, following a slump in the first half of 2015 that saw EPS and sales decline. The stock is in buy range from the 37.20 buy point.

Netflix Gaining In Europe, But Faces Regulatory Mandates

Netflix ( NFLX ) is successfully fending off a host of rivals in Europe thanks to its mix of Hollywood and local content, analysts say. After examining the online video markets in the U.K., Germany, France, Italy and Spain, investment bank UBS concluded that Netflix is well positioned for growth. “We think Netflix is doing quite well across Europe despite intense focus from local competitors in each market, not to mention competition with Amazon ( AMZN ), who was earlier to enter the U.K. and Germany,” UBS analyst Doug Mitchelson said in a research report Sunday. Mitchelson reiterated his buy rating on Netflix stock, with a 12-month price target of 141. Netflix stock was up 2%, near 94.50, in afternoon trading on the stock market today , but it has been trading below its 50-day moving average since posting disappointing earnings last month. Netflix’s early success in foreign markets comes as the company is ramping up production of original shows in local languages. “Management continues to suggest that only about 20% of international viewing is from local content and that U.S. content continues to travel well everywhere, including in the rest of world markets launched this year,” Mitchelson said. “Thus, we expect Netflix to continue to focus the majority of its content budget on U.S. content, though increasingly originals and almost exclusively content with global rights.” Europe Seeking More Local Content From Video Services Last week, the Financial Times reported that Netflix and other on-demand video services could be forced to devote at least 20% of their catalogs to European movies and TV shows as part of an overhaul of the EU’s broadcasting rules. The services also would be required to prominently display European content. Streaming video services currently are not covered by laws that require national broadcasters to ensure that the majority of their content is European. Those same regulations force broadcasters to contribute financially to the production of European films and TV shows. Netflix has opposed the proposed regulations, the FT reported. Investors are increasingly focused on Netflix’s international growth, as its service nears the saturation point in the U.S., Piper Jaffray analyst Michael Olson said in a report Monday. He rates Netflix stock as overweight, with a price target of 122. “While in calendar year 2016 we expect international will account for 35% of revenue, we are modeling 50% by 2020,” Olson said. RBC Capital Markets analyst Mark Mahaney on Sunday maintained his outperform rating on Netflix stock, with a price target of 140. RBC’s recent surveys of online users found strong usage and high satisfaction for Netflix in the U.S. and rising demand in France and Germany, Mahaney said. RELATED: Netflix Signs Programming Deal With Hispanic TV Leader Univision

Apple Shakes Off Concerns About Becoming The Next BlackBerry

Apple ( AAPL ) stock rose Monday as investors digested a positive iPhone 7 production report, along with a cautionary article that suggested Apple was at risk of becoming the next BlackBerry ( BBRY ). Apple stock was up 1.6%, near 97, in afternoon trading on the stock market today . Taiwan’s Economic Daily News reported Monday that Apple has ordered contract manufacturers to produce 72 million to 78 million iPhone 7 handsets this year, a record figure for a new iPhone and above analyst estimates of 65 million units. The iPhone 7 is expected to be released in September, with a slimmer design, faster processor and improved camera as compared to earlier iPhones. This 10th-generation iPhone might even sport a waterproof design for the first time. Apple Falling Behind In AI Meanwhile, influential tech blogger and Web developer Marco Arment on Saturday posted an article that argued Apple is falling behind Amazon.com ( AMZN ), Facebook ( FB ) and Alphabet ( GOOGL )-owned Google in artificial intelligence (AI), digital assistants and voice interfaces. He said Apple could miss the next big shift in computing, just as onetime cellphone giant BlackBerry missed the move to smartphones from email-centric feature phones. “Amazon, Facebook, and Google — especially Google — have all invested heavily in Big Data Web services and AI for many years, prioritizing them highly, iterating and advancing them constantly, accumulating relevant data, developing effective algorithms and attracting, developing and retaining tons of specialized talent,” Arment wrote. Arment says Apple is not putting the same emphasis on Big Data and AI as its rivals. “Becoming a major Big Data AI services company doesn’t happen completely in secret and suddenly get released to the world, completed, in a keynote,” Arment said. “It’s a massive undertaking, spanning many years, many people and a lot of noticeable interaction with the world. It’s easier to conceal the development of an entire car than a major presence in AI and services.” Analysts Keep Buy Ratings On Apple Stock Investors on Monday were more focused on the Economic Daily News article and a trio of reassuring analyst reports. Pacific Crest Securities analyst Andy Hargreaves on Sunday reiterated his overweight rating on Apple stock with a price target of 123. “We believe concerns about a potential lack of innovation in the iPhone 7 underestimate the extraordinary growth in the user base over the past two years, which is likely to drive increased replacement volume and overall iPhone unit growth in fiscal 2017, almost regardless of the hardware,” Hargreaves said. BMO Capital Markets analyst Tim Long also is positive on Apple because of the potential for iPhone users to upgrade with the iPhone 7 cycle. “What we find most interesting is that we believe we are entering the iPhone 7 cycle with the highest percentage of phones in the installed base at least two years old, at about 26% (compared to 23% for iPhone 6),” Long said. “This translates to about 120 million phones. As a result, we believe the device will drive an improved replacement rate, even if it has lackluster features.” Also, the huge growth in used iPhone sales will increase the installed base of iPhone users and boost services revenue, Long said. He reiterated his outperform rating on Apple stock, with a price target of 117. Nomura analyst Jeffrey Kvaal maintained his buy rating on Apple with a price target of 120. He noted the success of Apple’s recent iPhone SE launch but cautioned that the lower-cost smartphone could cannibalize sales of iPhone 6S handsets. Apple chip suppliers Broadcom ( AVGO ), Skyworks Solutions ( SWKS ), Qorvo ( QRVO ) and NXP Semiconductors ( NXPI ) were up Monday intraday. Broadcom climbed 1.5%, Skyworks 2.4%, Qorvo 2.9% and NXP Semi 1.1%. RELATED: Apple Has Largest Cash Stockpile, Twice That Of Microsoft’s Apple Faces ‘Existential Threat’ From Messenger Bots .