Cisco Systems, Inc. CSCO's fiscal first quarter earnings marked an end to an eight-quarter streak of revenue decline.
The Analyst
KeyBanc Capital Markets' Alex Kurtz maintains an Overweight rating on Cisco's stock with a price target boosted from $33 to $39.
The Thesis
Kurtz highlighted four aspects of Cisco's earnings that he said confirm a bullish stance on the company. (See Kurtz' track record here.)
- The overall macro tone was "stable."
- Deferred product revenue from recurring sources rose 37 percent from a year ago, showing momentum in the software model (such as AppDynamics) and Cisco ONE bundle and subscriptions.
- Catalyst 9K upgrades are "trending toward the higher content advanced bundle" in bookings data.
- The ACI/Data Center segments is seeing growth with the webscale market highlighted.
Bears have two key points that support the other side of the trade, Kurtz said:
- A 5-percent decline year-over-year in enterprise orders, as the new campus architecture delayed decisions.
- Management's commentary relating to edge routing implies a potential headwind ahead, as customers could be taking a more drastic cut to their ISR spending with SD-WAN capabilities in the market.
Price Action
Shares of Cisco were trading higher by more than 6 percent early Thursday morning at $36.43, above the stock's 52-week high of $34.75.
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