Cisco Heating Up, Oppenheimer Says

According to a new report by Oppenheimer, Cisco Systems, Inc. CSCO could be on its way to a big Q2. Oppenheimer’s recent channel checks and supply chain analysis indicates that Cisco is off to a strong start this quarter.

Possible April Quarter Upside

Of Oppenhemier’s contacts, 41 percent indicated quarter-over-quarter revenue growth and only 7 percent indicated quarter-over-quarter revenue declines. Analysts see continuing strength in North America and improvement in Europe.

Improvements In July Quarter

Looking forward to the July quarter, 61 percent of contacts pointed to quarter-over-quarter revenue growth, while not a single one suggested revenue declines. In addition, analysts see possible carrier capex improvements during the quarter.

Mixed Emerging Markets

Overall, geopolitical issues have hurt recent demand in China and Russia and forex headwinds continue to weigh on international sales. However, analysts highlight International Business Machines Corp. IBM's recent strength in Brazil and India, EMC Corp EMC's strong numbers in Latin America, and Cisco’s recent demand growth in Mexico and India.

Forex Concerns Overblown

Analysts believe that “solid demand” for the Nexus 9000 and UCS will have a much larger impact on Cisco’s bottom line than the strong dollar. “Our work shows that past FX moves did not have adverse impact on results,” they explain.

Outlook

Overall, analysts believe there is upside to Cisco’s consensus expectations for the next two quarters. Oppenheimer has an Outperform rating on Cisco and a $32 target on the stock.

Cisco’s stock is up about 4.1 percent so far in 2015.