5G Could Help Drive Cisco Systems Recovery, BofA Says In Upgrade

Cisco Systems, Inc. CSCO has multiple upcoming product cycles that span more than 35% of its product revenue, according to BofA Securities.

The Cisco Analyst

Tal Liani upgraded Cisco Systems from Neutral to Buy and raised the price target from $48 to $55.

The Cisco Thesis

Cisco’s numbers are likely to bottom out in the fourth quarter, and growth rates may subsequently improve, with easier compares and a cyclical recovery, Liani said in a Tuesday upgrade note. (See his track record here.)

Growth hit a low of negative 7.5% in the third quarter of 2020, and the company is likely to return to a positive growth rate of about 4.4% in the second quarter of 2021, the analyst said. 

Upcoming product cycles could generate accelerated growth, he said. 

“5G could drive better growth in routing reversing multiple years of secular declines; Optical and Ethernet 400G technology could drive data center switching and routing growth; and a WiFi 6 upgrade cycle, new products for cloud titans, and a bolstered optical portfolio that includes 400ZR and pluggables should also drive growth.”

These initiatives could add over $1.5 billion to Cisco’s revenue by 2022, Liani said, adding that he expects the stock valuation to expand once these cycles materialize.

CSCO Price Action

Shares of Cisco Systems were up 2.51% at $46.49 at the time of publication Tuesday.

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