Arik Hesseldahl

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Analysts Like Cisco Again After Earnings Beat

Shares in networking giant Cisco Systems are rocking this morning, following last night’s better-than-expected earnings report. As of 10:08 am ET, the shares are up by more than 7 percent, or $1.29, to $18.64.

Wall Street analysts, having held back their approval for several quarters, all acted like teenagers at the last pool party of the summer, and jumped in with a batch of upgrades.

Shaw Wu of Sterne Agee raised his estimate on Cisco’s sales to $48.3 billion in fiscal 2013, which is $200 million higher than the Street’s consensus. He also expects Cisco to report a per-share profit of $1.95 next year. He left his $23 price target unchanged. “We continue to believe Cisco is an underappreciated turnaround story similar to what we have seen with Apple, IBM, and EMC in the past,” he wrote.

Sanjiv Wadhwani of Stifel Nicolaus had a similar call. He boosted his fiscal 2013 revenue estimate to $48.9 billion, and his EPS call to $1.92 per share, up from $1.86 previously, and said he was impressed with Cisco’s relatively strong enterprise sales. “While too early to call a trend, the improvement could be a signal that spending is picking up despite the uncertain macro. We characterize the tone as markedly better versus three months ago,” he wrote.

Other analysts upgrading Cisco shares include Troy Jensen at Piper Jaffray, who raised his price target to $23 from $22; Mark Sue at RBC Capital, who boosted his price target to $19 from $17; Drake Johnstone and Davenport & Co., who upgraded the shares to “buy,” with a price target of $24; and Jason Noland at Robert W. Baird & Co., who raised his target to $21 from $19.

If there was a grump in the room, it had to be Brian Marshall at ISI. He maintained his “neutral” rating on Cisco shares. “While Cisco surpassed a low bar and reported solid metrics in a few areas … overall trends are still deteriorating in our view,” he wrote. Referring to Cisco’s 75 percent boost of its quarterly dividend, and a promise to commit 50 percent of free cash flow to dividends and share buybacks, Marshall wrote: “We believe Cisco’s focus on its capital allocation and dividend policy is a sign of its maturation and limited growth opportunities.”


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