(Updated from 8:18 a.m. EDT)

Today is

Cisco's

(CSCO) - Get Report

lucky day -- at least on the analyst front.

Ahead of its earnings report that will be released after the close of trading today, the networking giant got a thumbs up from

Morgan Stanley Dean Witter

analyst Christopher Stix. Stix upgraded the company to market outperform from neutral.

In preopen trading, Cisco surged 6.3% to $20.46 amid heavy volume, according to

Instinet

. The stock is well off its 52-week high of $70, but it's up 55% from its 52-week low of $13.18 hit on April 4. Cisco recently took a

$3 billion restructuring charge to write down an enormous amount of surplus inventory.

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The note is important not only because it ups Cisco on the very day it releases earnings, but because it comes from Stix, who began making noise in August that Cisco could

be facing some issues. At that time, he stuck with his $90 price target until late November, when Cisco skidded to the low $50s and other analysts, like

Lehman Brothers'

Tim Luke, were making similar calls.

Stix said he thinks the stock will recover half a year before its fundamentals improve. To take advantage of that recovery, he wrote in a research report this morning, investors should buy soon. He set a price target of $25 and said he had confidence the company's enterprise business will recover, along with its core router business -- something he hinted at in a research report last week.

Last Wednesday, Stix published a report that told clients that it saw better data points in Cisco's channel, but he didn't touch the company's rating -- advising that Cisco's price was too rich at those levels. But since that note, Cisco is up 23%; in an about-face, Stix upgraded the company.

Why the change? The analyst said that Cisco's gross margins could get better -- something he didn't account for last week. He doesn't expect margins to reach the high water mark of the October 2000 quarter, when gross margins clocked in at 63.5% and net margins exceeded 20%, but Stix says that they're going to be stronger-than-expected. In his words, "there is more leverage in the Cisco business model." As a result, the analyst said his 9.6% net margin target was "conservative" and the Cisco was in a good position to capitalize on improved margins.

"The weakest businesses at Cisco are among the businesses with the lowest gross margins," he wrote. "The enterprise businesses have among the highest margins -- thus supporting a more robust margin rebound than we have modeled."

And it is in the lucrative world of enterprise business that Stix said was showing signs of a recovery, per his report last week. Spending by those struggling service providers, Cisco's main customers in its core router market, is expected to stabilize, according to the analyst. "We believe the company is beginning to regain momentum in the core router business," he wrote.

TheStreet.com's

Jim Cramer

last night told investors to expect some upgrades yesterday.