Cisco's Post-Earnings Gain Mirrors Positive Wall Street Commentary

Cisco Systems, Inc. CSCO stock is trading higher Thursday after the company reported better-than-expected first-quarter earnings and revenue driven by strength in its core Infrastructure Platforms segment. Cisco also issued guidance that was in-line with expectations.

The stock was up about 5.2 percent to $46.64 at time of publication.

Analysts remain mixed on Cisco in the long term, but say a strong product pipeline in 2019 may offset the negative impact of the trade war.

Here’s a sampling of what some analysts had to say about Cisco following the report.

Product Demand

BMO Capital Markets analyst Tim Long said 15 percent Enterprise revenue growth was most impressive.

“While we note that two large software-heavy deals had a sizable impact on the growth rate due to ASC 606, we are still encouraged by strong traction in Catalyst 9K sales and a ramping SDWAN portfolio,” Long wrote.

KeyBanc analyst Alex Kurtz said Cisco demonstrated strength across all product categories in the third quarter.

“Standout product areas included security at +11% y/y, improvements in UCS servers that have been a multiyear headwind, and most importantly, continued upside from the Catalyst 9000 (CAT9K) refresh that drove +9% y/y growth in infrastructure (vs. our 6% y/y estimate),” Kurtz wrote.

Solid Execution

Raymond James analyst Simon Leopold said tariffs set to go into effect in 2019 may not have as large an impact as feared.

“Cisco reported strength across its portfolio and indicated that price increases related to tariffs have not destroyed demand, and the international markets facing Forex headwinds remained healthy,” Leopold wrote.

Oppenheimer analyst Ittai Kidron said Cisco is consistently adding to its track record of strong execution.

“We see further upside ahead as Cisco executes on its multi-cloud vision, with an aggressive buyback and solid dividend yield supporting shares,” Kidron wrote.

JMP Securities analyst Erik Suppiger said Cisco’s across-the-board strength bodes well for other vendors.

“F4Q18 revenue growth of 8% (7% organic) and order growth of 8% is the best growth for Cisco in years,” Suppiger wrote.

Capital Return

Wells Fargo analyst Aaron Rakers said consistent free cash flow and an aggressive capital return program are a winning combo for investors.

“Amid clear macro/tariff-related demand concerns, Cisco provided a positive F2Q19 guide with revenue expected to be +5%-7% y/y (ex-SVSS divestiture; implying ~$12.2- $12.5B),” Rakers wrote.

Tigress Financial analyst Ivan Feinseth said he sees the stock making it into the $50s on the strength of its strongest earnings report in several quarters.

“Cisco’s$25 billion share repurchase plan along with its dividend yield of 3% also increases shareholder return potential,” Feinseth wrote.

Ratings And Price Targets

• BMO has a Market Perform rating and $48 target.
• KeyBanc has an Overweight rating and $53 target.
• Raymond James has an Outperform rating and $52 target.
• Oppenheimer has an Outperform rating and $50 target.
• JMP Securities has a Market Perform rating.
• Wells Fargo has an Outperform rating and $52 target.

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