New Security Tech The Key To Cisco's Upgrade At Morgan Stanley

Despite a more than 2-percent decline in Cisco Systems, Inc. CSCO's stock in reaction to its fiscal first-quarter earnings report, analysts at Morgan Stanley remain bullish on the long-term story. The firm's James Faucettemaintains an Overweight rating on Cisco's stock with an unchanged $39 price target.

Key to Cisco's long-term bullish thesis is the company's new security technologies that can exploit SDN concepts and stabilize networking replacement cycles, Faucette argued in a research report. This message was emphasized during the post-earnings conference call where management also made it clear it is focused on transforming the networking business by offering customers a differentiated platform with security and analytics incorporated, such as the Catalyst 9000 series.

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Cisco also noted that it gained 22 customers for the Catalyst 9000 in the first four weeks since it was introduced, the analyst continued. The company also saw a 49-percent year-over-year increase in security deferred revenue.

However, products with new architectures much like the Catalyst 9000 will require longer evaluation periods before gaining traction, which in part explains the less-than-stellar performance in the quarter, Faucette added. But as familiarity grows and evaluation cycles shorten the company will no longer report "ho-hum" performance in the security sector.

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Posted In: Analyst ColorEarningsLong IdeasNewsReiterationAnalyst RatingsTechTrading IdeasCatalyst 9000CiscoCisco EarningsJames Faucette
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