Cisco's Sell-Side Roundup: The Good And Bad In Q3, And What's Next

Cisco Systems, Inc. CSCO's fiscal third-quarter earnings report and fourth-quarter guidance was alarming enough for investors to send the stock lower by more than 7 percent Thursday.

Here is a summary of what some of Wall Street's most notable analysts are saying after the report.

Citi: Maintain At Buy

Citi's Jim Suva maintains a Buy rating on Cisco's stock with a price target lowered from $37 to $36.

According to Suva, Cisco's earnings report came in better than expected, but the company's guidance fell short of expectations. But the analyst remains bullish on the stock as the company's earnings per share could benefit by around 16 percent to 20 percent under President Donald Trump's tax reforms.

The analyst also noted that around 3 percent points of Cisco's sales declines from a year ago is attributed to the company's shift to a subscription model along with a decline in business from the federal government.

MKM: 'Modest' Progress Seen

MKM Partners' Michael Genovese maintains a Neutral rating on Cisco's stock with a price target lowered from $35 to $34.

Genovese noted that Cisco's "solid" third-quarter report is overshadowed by the fact that the company has only shown "modest" progress in its business transition. Specifically, 31 percent of revenue in the quarter came from recurring sources, which does mark an increase from 29 percent in the prior year but still consistent with prior quarters.

Looking forward, Cisco's stock could re-rate higher as the company's percentage of recurring revenue increases.

Wunderlich: Tough Environment

Wunderlich's Matthew Robison maintains a Hold rating on Cisco's stock with an unchanged $30 price target.

Robison's unchanged view stems from the fact that the earnings report shows that the legacy tech company is operating in a tougher-than-expected environment but there are some encouraging signs, including a better-than-expected performance in the routing segment.

Robison also believes Cisco's progress toward building a company that boasts a strong recurring revenue mix will be "gradual" although there are no immediate catalysts to excite shareholders in the near term.

Cowen: Weak Outlook But Still A Buyer

Cowen's Paul Silverstein maintains an Outperform rating on Cisco's stock with an unchanged $39 price target.

Silverstein acknowledged the "disappointing" revenue growth seen in the third quarter but also highlighted the company's margin structure remains "impressive." Since these two factors cancel each other out, the analyst maintains a bullish stance on Cisco's stock, which is trading at a "highly favorable" risk to reward profile.

Jefferies: Not As Bad

Jefferies George Notter maintains a Buy rating on Cisco's stock with an unchanged $37 price target.

While Notter admitted to being "frustrated" with Cisco's guidance, it is hard to believe the overall IT spending environment is as bad as the guidance assumes it to be.

The analyst also highlighted the fact that Cisco's operating margins hit 32.3 percent, which marks its best margin result dating back all the way to the July 2004 ending quarter. Looking forward the analyst is confident that the company can at the very least sustain margins, if not improve them further.

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