Cisco and Palo Alto Networks Cut to Neutral at Bank of America

Cisco Systems and Palo Alto Networks are lower after Bank of America analysts downgrade shares of the tech companies to neutral from buy.
Author:
Updated:
Original:

Shares of Cisco Systems (CSCO) - Get Report and Palo Alto Networks (PANW) - Get Report were off Wednesday after Bank of America analysts downgraded shares of the two tech companies to neutral from buy.

The analysts said that they saw "signs of weakness below the surface" in the two  companies.

Shares of Cisco were down slightly to $42.25, while Palo Alto Networks was off 1.3% to $238.60.

The analysts at Bank of America said they did not see "a major catalyst for (Cisco's) stock in the coming months, and we see several headwinds that could continue to weigh on upcoming results."

Bank of America, which lowered the price target on Cisco to $52 from $56, said that some of the key risks facing Cisco include a potential "plateauing" in the Catalyst 9k campus switching cycle and harder comparisons and a potential declaration in the "exceptional performance" of Cisco's Security and Applications businesses.

However, the analysts said they still see Cisco as "a quality name with value and dividend yield."

In November, Cisco posted stronger-than-expected first-quarter earnings but said uncertain conditions would hit client orders in the months ahead in what CEO Chuck Robbins called "a challenging macro environment."

Regarding Palo Alto Networks, the analysts said they were increasingly concerned about a decline in product revenue, which they view as a "leading indicator" for the entire company. They cut their share price target to $265 from $275.

Palo Alto Networks in November guided investors toward a softer end to the year that offset solid first-quarter results.

Bank of America also downgraded cybersecurity company FireEye (FEYE) - Get Report to neutral but affirmed its $20 price target. The analysts said there is “some risk that the most exciting pieces of the portfolio,” particularly Helix and Verodin, are “nascent and unable to offset the legacy appliance pressures through 2020.”

On Tuesday, a SunTrust Robinson Humphrey analyst boosted his rating on FireEye to buy from hold, saying rising tensions in Iran and Iraq "have put the spotlight on cybersecurity, and we believe it will lead to increased government and private-sector spending."

Shares were down 3.9% to $17.45.

Cisco Systems is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CSCO? Learn more now.