Cisco's Price Target Boosted To $34 At Barclays Ahead Of Q2 Report

Cisco Systems, Inc. CSCO has stable margins and cash flows, with less cloud disruption risk, Barclays’ Mark Moskowitz said in a report. He maintained an Overweight rating on the company, while raising the price target from $31 to $34.

Technology categories are converging due to the cloud. With this, Cisco’s stock could be the next large-cap tech stock to rerate higher, similar to the valuation metrics of Microsoft Corporation MSFT, Moskowitz commented. He added that Cisco has a good margin profile and its model could support “cloud build-outs from an infrastructure perspective.”

The valuation gap with Microsoft would likely persist, since Cisco neither has a “software-like” EBITDA margin profile nor is it a primary cloud provider with an asset like Azure.

July Quarter

Cisco is scheduled to report its July-quarter results on August 17 and is likely to report mixed revenue trends, offset by gross margin expansion. The revenue estimates for the July quarter and 2016 have been reduced by 0.2 percent and 0.3 percent, respectively.

“We expect gross margin to be higher, owing to better switching and security trends, partially countered by weakness in routing. The net impact is our Jul-Q and C2016 EPS estimates increase by 0.8% each. The magnitude of revisions is not big but is symbolic of a model with margin and cash flow stability,” Moskowitz wrote.

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