Cisco Systems (CSCO) had been a much maligned member of the tech sector until recently. Shares had been declining ad infinitum and analysts were downgrading but the company seems to have rebounded in a big way. While Dell (DELL) and Hewlett-Packard (HPQ) offer weak guidance for the next quarter Cisco Systems, Inc., which designs, manufactures, and sells Internet protocol (IP)-based networking, has surprising optimistic views for the coming quarter.
1) You’d be in good company-Cisco was upgraded by Ehud Gelblum of Morgan Stanley who who increased his rating from Equal Weight to Overweight with a $21 price target. Brian White of Ticonderoga reiterated the buy rating yesterday as well with a price target of $25. Shaw Wu at Sterne Agee mirrored White’s price target and also confirmed Cisco as a buy on the basis of consensus overestimating competitive pressures. Stifel Nicolaus, and Wunderlich Securities also upgraded the stock.
2) Guidance Looks Promising– The journey back to healthy has been a long process for Cisco and its by no means complete, but the July 2011 results and October guidance appear to be positive steps. Non-federal switching orders are up 13 percent year over year and the company managed to deliver an incremental revenue upside of $200 million relative to expectations without negatively impacting profitability. Strength in orders across product segments is expected to help the company accelerate to its highest levels in over a year. Additionally the restructuring within the company will aid execution and help revenue.
3) It’s Cheap-The last four quarters have taken a major toll on Cisco’s share price and company is trading with a much more reasonable P/E ratio than most of its competitors. At around $15 per share, Cisco is extremely depressed and while some analysts might argue the gloomy macroeconomic situation should be taken into account, Cisco is a steal right now, a fact that will likely change should the company out perform other tech companies that have not been seeing the same strength in orders.
