Cisco Systems Downgraded To Neutral: B Of A Analyst Expresses Concern Over High Street Estimates

B Of A Securities analyst Tal Liani downgraded Cisco Systems Inc. CSCO to Neutral from Buy at a price target of $56.

The analyst is concerned that the street estimate for CSCO's product revenue growth of 3% Y/Y (to $44.2 billion) in FY24 and 2% Y/Y (to $45.3 billion) in FY25 is much higher than the historical range of $36 billion-$39 billion on limited backlog support. 

Liani estimates product revenue of ~$43 billion in 2023, supported by a backlog drawdown of $5 billion-$6 billion, with an additional decline of around $4 billion in H1 2024. This will bring the backlog to its normal historical levels of $4 billion-$5 billion by H2 2024.

The analyst expects annualized product revenue to be within $3 billion-$6 billion, starting H2 2024, which is higher than the historical levels despite limited backlog growth. 

Liani reduced the estimate for product revenue to $43.3 billion (from $45.1 billion) in 2024 and $42.8 billion (from $47.0 billion) in 2025, 2% and 6% below the Street consensus, respectively.

Also Read: Cisco Launches Power-Efficient Networking Chips, Takes on Broadcom and Marvell in AI Arena

Price Action: CSCO shares are trading lower by 2.48% at $50.83 on the last check Wednesday.