On Thursday, Piper Sandler adjusted its price target on shares of Cisco (NASDAQ:CSCO), increasing it to $57.00 from the prior target of $52.00. The firm maintained a Neutral stance on the stock.
The adjustment follows Cisco's recent performance, which did not fully meet the high expectations set prior to the company's earnings release. Despite the stock trading slightly lower, the firm acknowledged Cisco's significant wins with major hyperscalers and positive momentum in artificial intelligence (AI).
Cisco's quarterly results showed mixed lead metrics, particularly outside of Splunk (NASDAQ:SPLK), a company that outperformed this quarter and is gaining traction. Organic growth in Cisco's Security segment was notably low at 2%, and commentary regarding the U.S. Federal business was not as positive as hoped. These factors contributed to the restrained outlook for an enterprise network refresh in the upcoming quarters.
Nevertheless, Piper Sandler found reasons for optimism in Cisco's report, including the strength of the company's Annual Recurring Revenue (ARR), major hyperscaler wins, and the potential for increased opportunities and synergies with Splunk. The firm also noted the sustainability of Cisco's Gross Profit Margin (GPM) and the raised outlook as positive signs.
The report concluded with a sense of confidence in Cisco's ongoing business transition and the opportunities ahead, particularly in AI. The increased price target to $57 reflects a higher multiple based on these prospects, with Piper Sandler citing the potential return of "Megatron," a reference to Cisco's growth and innovation potential.
In other recent news, Cisco Systems Inc (NASDAQ:CSCO). has been the subject of various analyst upgrades, following a modest earnings beat and an upward revision of FY25 growth outlook. Citi has raised its price target for Cisco from $62 to $64, while maintaining a Buy rating.
This comes after Cisco reported an impressive $300 million in AI orders for the quarter, exceeding expectations. The company also saw a year-over-year increase of 220 basis points in gross margin, partly credited to contributions from Splunk.
In addition, BofA Securities and JPMorgan have shown confidence in Cisco's growth potential, raising their price targets to $72 and $66, respectively. The analysts highlighted Cisco's robust overall performance, despite concerns over U.S. Federal spending. Cisco's Q4 2024 revenue was reported at $13.6 billion, marking a 10% year-over-year decline, but sectors such as Security and Observability saw significant growth.
Furthermore, Cisco has launched a new AI server family and AI PODs leveraging NVIDIA (NASDAQ:NVDA) accelerated computing, and announced a significant overhaul of its partner program, backed by an $80 million investment. The company has also made a substantial investment in cloud services provider, Coreweave. These recent developments reflect Cisco's commitment to enhancing AI infrastructure and expanding its presence in the rapidly evolving sector.
Evercore ISI maintained its Outperform rating for Cisco, suggesting that the current revenue estimates for the January quarter and FY25 might not fully account for the potential rebound in the networking sector. Lastly, Cisco announced a substantial investment in cloud services provider, Coreweave, valuing it at $23 billion. These are all recent developments within the company.
InvestingPro Insights
Cisco's recent performance and future prospects align with several key metrics and insights from InvestingPro. The company's market cap stands at an impressive $236.17 billion, reflecting its significant position in the Communications Equipment industry. This aligns with the InvestingPro Tip that Cisco is a "Prominent player in the Communications Equipment industry."
The company's financial health appears robust, with a P/E Ratio (Adjusted) of 21.11 for the last twelve months as of Q4 2024, indicating a reasonable valuation relative to earnings. This is particularly noteworthy given that Cisco is "Trading near 52-week high," as highlighted by another InvestingPro Tip.
Cisco's dividend strategy also stands out. With a current dividend yield of 2.7% and a history of raising dividends for 14 consecutive years, as noted in an InvestingPro Tip, the company demonstrates a commitment to shareholder returns. This consistent dividend growth aligns with Piper Sandler's positive outlook on Cisco's business transition and future opportunities.
The strong return over the last three months, mentioned as an InvestingPro Tip, is quantified by the impressive 31.23% price total return over that period. This performance supports Piper Sandler's increased price target and the potential for growth, especially in AI-related opportunities.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Cisco, providing a deeper understanding of the company's financial position and market performance.
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