This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Cisco's Still a Strong Buy Ahead of Earnings

Accordingly, Cisco has spent a good portion of its cash on recent acquisitions for the likes of Meraki, Cariden and BroadHop. So, as the hardware businesses continue to erode, Wall Street is applauding the company's growth and investments in software-defined-networking, or SDN.

Cisco's new outlook has also caught the attention of Raymond James analyst Simon Leopold, who recently said that shares were undervalued by 30%, while applying a $25 price target. In a research note to investors, Leopold said:

"We expect Cisco to outline its strategic vision to become a broader IT supplier with a greater software bias, which aids margin. We expect Cisco maintains its 5-7% long term growth target while offering cautious commentary on the near term."


Leopold's mention of margins suggests increased profitability while Cisco tries to build its SDN business. Besides, even though the hardware revenue and margins haven't been overly impressive, Cisco's hardware still powers more than half of the Internet - meaning, Cisco's transition presents a win-win situation for investors.

As the company continues to invest in its future, the good news is that Cisco is still growing in other areas such as data center, whose revenue rose 65% year over year in the second quarter. That is also a sign that Cisco is still a dominant force in servers where it is outperforming Dell (DELL) and Hewlett-Packard (HPQ).

What's more, the company's cash position will continue to present the company with options not available to rivals like Juniper (JNPR) and F5 Networks (FFIV). In that regard, when applying modest 3 to 4% free-cash flow growth, the stock still supports a fair market value of $30. That is despite having already gained 7% on the year. Cisco remains a strong buy.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,131.97 +100.83 0.59%
S&P 500 1,998.98 +14.85 0.75%
NASDAQ 4,552.7590 +33.8570 0.75%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs