Cisco is ‘putting together newer growth engines’ — analysts react to earnings
Cisco Systems Inc.’s stock jumped in premarket action Thursday as analysts raised their price targets following a better-than-expected earnings report.
The tech giant’s profit and outlook topped Wall Street estimates, and Cisco CSCO, +2.09% showed quarterly revenue growth for the first time in more than a year and a half.
The maker of networking equipment also announced a 14% hike for its quarterly dividend to 33 cents a share, as well as an authorization to buy back an additional $25 billion in shares.
Shares in the Dow Jones Industrial Average DJIA, +1.03% component were recently up 7% in premarket action and above the $45 mark. They’re touching levels last seen in December 2000 and leading Dow futures YMH8, +0.95% higher.
Below are some of the initial reactions from analysts who cover the stock.
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‘Putting together newer growth engines’
“While the company has clear challenges given secular headwinds in its traditional sweet spot of switching/routing, we believe Cisco is slowly putting together newer growth engines,” said Daniel Ives, head of technology research at GBH Insights, in a note.
The new drivers include security, clouding-computing initiatives and software-as-a-service offerings, added Ives, who reiterated his rating of “attractive” and his price target of $45.
Stock has ‘room to run’
“We think the stock has more ‘room to run’ particularly as [the April quarter] was the most difficult [year-over-year] growth comparison for switching,” said RBC analyst Mitch Steves in a note, referring to Cisco’s big network switching business.
The company soothed some concerns about the current April-ended quarter by forecasting earnings per share of 64 cents to 66 cents on revenue of $12.3 billion to $12.5 billion. Analysts had been expecting EPS of 63 cents on revenue of $12.1 billion for the fiscal third quarter.
Steves backed his “outperform” rating and raised his price target to $50 from $44, implying a rally of about 11% from the stock’s level in premarket action.
Transforming itself as planned
“Cisco appears to be executing against its goal of transitioning to a recurring software model,” said KeyBanc analysts Alex Kurtz and Steve Enders in a note.
The KeyBanc analysts backed their “overweight” rating and raised their price target to $49 from $43.
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Twenty of the 29 analyst teams that cover Cisco have the equivalent of a “buy” rating on the stock, and the other nine teams go with hold ratings for the company, according to FactSet data. The average price target is $45, with the predictions ranging from $33 to $55.
Cisco’s shares have gained 9.9% so far in 2018, and they’re up 28% over the past 12 months, while the Dow has advanced 0.7% this year and climbed 21% over the past 12 months.