Cisco Gets Boost as Goldman Sees Reopening Opportunity

Goldman upgraded Cisco shares on the expectation that businesses will lift spending on networking equipment as their offices reopen.
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Cisco Systems  (CSCO) - Get Report shares rose on Thursday after Goldman Sachs analysts upgraded the network-equipment company to buy from neutral on the expectation that businesses will lift spending on networking equipment as their offices reopen post-pandemic.

The investment firm also raised its 12-month price target on the San Jose, Calif., company's shares to $59 from $50. 

"[One] of the key focus areas for enterprise spending in later 2021 is likely to be increased capacity on campus networks to support workers returning to the office with much higher videoconferencing usage," analyst Rod Hall said.

Based on its channel checks, Goldman expects "increased enterprise spending on campus networking to enable a videoconferencing-heavy return to office." That, the firm said, should benefit Cisco's top and bottom lines

The firm estimates that at least half the installed base of Cisco's Catalyst wireless-network switches must be upgraded to the newer Catalyst 9K lineup, presenting a opportunity specific to Cisco. 

Read More: Cisco Falls Despite Earnings and Revenue Beat

Hall estimates that Cisco campus-switching revenue was $8.4 billion in fiscal 2020, down 5% from the year earlier and representing about 23% of the parent's overall product revenue. 

Goldman's channel checks suggest that expectations for network-spending priorities have "improved significantly" from its previous survey in September. And order trends for Cisco products have been positive, Hall said. 

Cisco shares at last check were up 1.6% to $50.45.