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2 Telecom Stocks to Buy Now

Tickers in this article: ALU CIEN CSCO JNPR
NEW YORK ( TheStreet) -- Placing bets on telecom stocks requires faith that carrier spending will rebound. But this is precisely what industry experts believe happen -- to what extent remains to be seen.

However, because the entire sector reached such depressed levels in 2012 there's a prevailing notion that, well... how much worse can 2013 be? This year if the sector recovers only 1/3 of its 2012 losses, investors would do very well.

Here are a couple of names to keep an eye on.

Ciena (CIEN)

I'm going to lead off with Ciena. The stock is currently trading at $16 but in 2012 it was all over the map. I've always wanted to like Ciena but the company has not been able to escape its rut -- at least not to the extent that I would like. Also, recent earnings didn't exactly woo investors over much cheaper rivals.

For the period ending in October, Ciena reported a non-GAAP loss of 7 cents per share on revenue of $465.5 million. The company missed on both the top and bottom lines as Street estimates called for a loss of 6 cents on revenue of $468.3 million.

Although revenue dropped almost 2%, it was encouraging that sales advanced 2% year over year. On a GAAP basis, the company lost $38.8 million, or 39 cents per share. The company's main challenge continues to be profitability. Adjusted gross margin was 42.7%, worse than 43.2% logged a year ago. Then again, it was a 3% improvement from the third quarter.

The outlook remained somewhat cautious. Management offered revenue estimates ranging from $435 to $460 million, in line with analysts' expectations. But is that enough to place a bet on the stock today?

However, on a relative basis they are pretty consistent with the guidance provided by rivals Cisco (CSCO) and Juniper (JNPR) .

I like the stock at these levels. If Ciena can show it can innovate and leverage its existing technological advantage to fight off pricing pressure, the stock should reach $20 by the summer. Also, the company has to show investors that its increase in R&D expenses have not been in vain.

Alcatel-Lucent (ALU)

Alcatel-Lucent has all of the makings of an excellent turnaround story. Then again, this has been said for three years. This time there is evidence that things are beginning to fall in place. The stock gained over 80% in the last three months of 2012, which means that the Street is starting to believe.

Still, at a current price of $1.69 and a P/E of 3, it can be argued that pessimism lingers. The company is expected to lose money this year -- that's not a surprise. However, with a recent financing pact worth $2.1 billion, ALU has just been given time to get its house in order. This now gives the company some flexibility and latitude to extend maturities accordingly.