Goldman Sachs Equity Research analysts Simona Jankowski, Kent Schofield, Doug Clark and Justin Jordan look at the under-performing ComTech sector, specifically Infinera Corp. (NASDAQ:INFN), Calix Inc (NYSE:CALX), and Motorola Solutions Inc (NYSE:MSI).  Of these companies, they see Infinera as an opportunity and upgrade it to a Buy.

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The CommTech sector has underperformed over the last three years due to a combination of factors, including (1) the deflationary/cannibalistic impact from the move to cloud computing, (2) uneven macro trends, and (3) the overhang from concerns around software-defined networking (SDN).

While we have not had an Attractive sector view since 2H 2010, we now see several drivers of sector outperformance from here: (1) Better stewardship of shareholder capital, as companies are aggressively cutting opex and returning cash to shareholders; (2) a network infrastructure upgrade cycle, as Web 2.0 operators, cable providers, and telcos collide; (3) improving enterprise spending; (4) the emergence of new secular growth stories after recent IPOs, (5) lifting the SDN overhang as the hype turns to reality.

That said, our more positive outlook reflects at least as much bottom-up as top-down analysis, given CommTech is a very heterogeneous sector with significant stock dispersion. We now have nine Buy ratings and only three Sells. Our Buy-rated ideas include Qualcomm, Inc. (NASDAQ:QCOM), BroadSoft Inc (NASDAQ:BSFT), Cisco Systems, Inc. (NASDAQ:CSCO), Gigamon Inc (NYSE:GIMO), Infinera Corp. (NASDAQ:INFN), Infoblox Inc (NYSE:BLOX), Polycom Inc (NASDAQ:PLCM), Ruckus Wireless Inc (NYSE:RKUS), and Silver Spring Networks Inc (NYSE:SSNI). Our Sell-rated ideas include Brocade Communications Systems, Inc. (NASDAQ:BRCD), Motorola Solutions Inc (NYSE:MSI), and NetGear, Inc. (NASDAQ:NTGR).

Upgrading Infinera to Buy from Neutral

We see 35% upside to our $11.50, 12-month price target as Infinera Corp. (NASDAQ:INFN) benefits from the 100G optical upgrade cycle (long-haul in 2014 and metro starting in 2015). We are raising our 2014E/2015E/2016E non-GAAP EPS to $0.16/$0.36/$0.40 from $0.12/$0.27/$0.30 on higher operating leverage. Upgrading Calix Inc (NYSE:CALX) to Neutral from Sell as trends improve We raise our 2015E/2016E non-GAAP EPS to $0.62/$0.78 from $0.53/$0.68 and our 12-month price target to $9 from $7 on improving tier-2/3 carrier spend. Since downgrading to Sell on 9/10/13, CALX/S&P 500 are -35%/+11%.

Downgrading Motorola Solutions (MSI) to Sell from Neutral

We tick up our EPS and price target on higher assumed buybacks in 2014. However, given the guided 4-6% yoy sales decline in 1Q, Motorola Solutions Inc (NYSE:MSI)’s 0-2% sales growth guidance for 2014 requires above-seasonal growth for 2Q-4Q. We view that as a high bar, especially given the 11% decline in 2014 backlog.