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Cisco
Systems inventory is getting a lift on Friday from Wolfe Research analyst Jeff Kvaal, who lifted his score on the networking-infrastructure big’s inventory to Outperform from Peer Perform, setting a goal value of $63, for a possible achieve of about 20% from the present degree.
Cisco (ticker: CSCO) inventory has rallied 20% for the 12 months so far, aided by each a rotation by tech investors into cheaper legacy infrastructure plays from pricier cloud-computing shares, and a rising view that enterprise-IT spending will pick up as the economy reopens. Kvaal sees extra positive aspects forward.
“Strong IT spending should prove a tailwind to Cisco estimates through fiscal 2022,” Kvaal writes in a analysis observe. The analyst provides that “Cisco’s improving structural narrative,” together with extra software program income and rising publicity to public cloud gamers, “merit multiple expansion.”
Kvaal writes that his agency’s March survey of chief data officers demonstrated “firming” IT spending. “Our survey illustrated that spending focus has tilted back from all public cloud at the pandemic’s onset toward a balance of public cloud and on-prem/private cloud gear—Cisco’s wheelhouse,” he writes.
The analyst additionally notes that “relatively poor” efficiency with “webscale” cloud gamers has been a strategic gap for Cisco for years—however one which it’s now reversiing. He says trailing 12 months orders from webscale prospects rose 60% within the January quarter.
Wolfe notes that Cisco inventory has a five-year common two-year ahead earnings a number of of 14 occasions; he thinks {that a} mixture of a spending snapback, larger software program combine, and an “emerging webscale story” advantage the next a number of. His goal value relies on a 17x a number of primarily based on a calendar 2022 earnings estimate of $3.73 a share.
Cisco inventory on Friday is buying and selling up 2.5%, to $52.94.
Write to Eric J. Savitz at eric.savitz@barrons.com
