Morgan Stanley Still Loves Cisco Stock; Here's Why

In a report published Wednesday, Morgan Stanley analyst James E Faucette maintained an Overweight rating on Cisco Systems, Inc. CSCO, with a price target of $30, after the company hosted analyst meetings in San Diego, CA. Analyst James E Faucette said that the management expressed strong confidence in its product roadmaps as well as its ability to deliver "products with strong response." However, Cisco has left its key financial targets unchanged. Management expressed confidence in new products and roadmaps in diverse segments, including switching, security, software and collaboration. Management indicated that Cisco is now "leading the industry" and expects to gain share in these market segments. CEO Chuck Robbins reiterated that making large acquisitions was not the preferred way to boost the company's product portfolio and capabilities. Cisco has maintained this approach for a long time. CFO Kelly Kramer reiterated the key 3-5 year targets of 3-6 percent CAGR revenue growth, 5-7 percent CAGR EPS growth and sustained shareholder returns of more than 50 percent of FCF via dividends and buybacks. "The faster growth in EPS is expected to come from better operating margins (afforded primarily by incremental incentivechanges to improvesales productivity) and lower share counts," Faucette said. "We continue to believe that strong product cycles and increased confidence in Cisco's ability to resist disruption from new technologies has the opportunity to drive appreciation to our $30 price target," Faucette added.