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Cisco Stock Wavers; Credit Suisse Upgrades to Outperform

Credit Suisse upgraded Cisco stock after the company said it expected a revenue increase from software and subscriptions.
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Cisco Systems  (CSCO) - Get Cisco Systems, Inc. Report shares rose on Thursday as Credit Suisse upgraded the systems networking giant to outperform after Cisco said it expects a revenue increase from software and subscriptions.

Credit Suisse analyst Sami Badri raised his rating from neutral and boosted his price target to $75 from $56.

Shares of San Jose, Calif.-based Cisco have wavered on Thursday, most recently trading at $58.02, off 0.2%. The stock rose 17% in the six months through Wednesday amid the company’s financial performance.

“Investor sentiment is currently cautiously optimistic, but we believe the cautiousness will abate as CSCO executes on its long-term guidance while ramping its recurring revenue plans (software, subscriptions, etc.),” Badri wrote in a commentary.

“Product order growth is more durable than we formerly believed. … There is clearly a higher level of quality embedded in the product orders than investors initially appreciated.”

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That’s “supported by management’s above-consensus revenue [estimate] of 5% to 7% compound annualized growth through fiscal year 2025,” Badri said.

“With the product order debate put to rest, we believe there are more durable trends in play (routing, Silicon One, etc.), supporting our incrementally more positive view of the overall company.”

Further, “enterprise and public sector customer ordering are set to accelerate,” he wrote.

“Based on our mid-year projections and recent calendar-year third-quarter channel checks, we continue to find evidence that enterprise and public sector customers ([which make up] about 55% of total revenue), are only beginning their new wave of product orders and deployments.”

That “indicates an acceleration in activity,” Badri said.