What Top Analysts Are Saying About Cisco

Cisco Systems, Inc. CSCO announced Q3 financial results Wednesday and beat analyst estimates.

The company reported Fiscal Q3 2015 non-GAAP EPS of $0.54 vs. $0.51 in the prior year period on revenue of $12.1 billion, up 5.1 percent Year-over-Year.

The stock responded by moving higher and traded at $29.47 following Thursday’s open, up 0.39 percent.

Wall Street analysts commented on the results. Below are highlights from analysts with differing views on the stock along with current ratings and price targets.

Wunderlich - Hold, $29 price target

The company “reported well with breadth of orders like the prior quarter, but with tougher yr./yr. comparisons. In-line guidance seems qualitatively light relative to a celebratory earnings call ushering in Chuck Robbins as CEO after the tenure of John Chambers ends with completion of the current quarter. Progress includes high-end routing acceleration, switching momentum, continued strong Data Center growth, growth for Collaboration, the Meraki portion of wireless and Security with less Service Provider Video decline than expected. Routing success is qualitatively incremental to our outlook; if the company is hitting on as many cylinders when service provider demand comes back, we could see estimates increase. For now, our model is largely unchanged, as is our $29 target and Hold rating.”

Deutsche Bank - Buy, $33 price target

Cisco’s “product and sales teams are doubling down on “Security” – a category we believe is likely to hit a +$2B run rate in FY17, suggesting a 1.5-2% incremental growth from Security to CSCO’s topline, at mid 60s margins. Management agrees with our view around potential for accelerated higher-speed 40/100GE port refresh in Datacenter Switching due to ongoing Cloud buildouts, which is setup for higher blended ASPs and margins (counter to SDN whitebox bear case). We also noted conviction for high double-digit growth in the Meraki Cloud Service business, a +$1B run rate this year, in our view; with potential to drive ~1.5% in incremental growth in FY17. In Routing, CSCO’s sales teams are starting to target higher growth Web 2.0 Cloud opportunities, to partially offset structural weakness in US Telco capex.”

Credit Suisse - Underperform, $21 price target
 
“The tone in terms of orders was reassuring (management noted Enterprise Orders up 21% in the US, Enterprise Commercial Orders up 11%) also management noted solid traction with contact values over $1mn up 60% y/y and the average deal size rising over 30%. For the Nexus 9000 management noted 970 new customers (from ~1,400 last quarter) and customers for the APIC controller to reach 2,650 customers (up 580 this quarter). Despite all of this, switching revenue growth decelerated from 10.5% to 5.3% q/q. This leads us to believe that much of the new additions are really minimally incremental. We now assume switching revenue growth of 4.9%/0.7% for FY15/16. At the group level we assume revenues of $49.1bn/$50.4bn, growth of 4.1%/2.7% for FY15/16. While we believe that recent execution is to be applauded, we do note that this comes against favorable comparisons and the current revenue run rate over the past two years has not grown organically.”