Cisco Near Buy Point As Analyst Touts New Efforts Before Earnings – Investor's Business Daily

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XAutoplay: On | Off Cisco Systems (CSCO) stock climbed Monday after a Morgan Stanley upgrade to overweight, on views that Cisco’s push into security and software-defined networking will gain momentum.

“Security will increasingly be integrated with IT network functionalities, which we estimate could deliver as much as $17 billion in savings to global enterprises. The security/network combination may improve replacement cycles for Cisco,” said James Faucette, a Morgan Stanley analyst. He set a price target of 39, up from 32, on Cisco stock.

Shares in Cisco, a member of the Dow Jones industrial average, were up 2.3% to 34.23 in the stock market today, and have climbed roughly 14% so far this year. Cisco is nearing a 34.63 buy point, which would also be a 16-year high.

Cisco reports fiscal third-quarter 2017 earnings late Wednesday.

Faucette also sees possible upside for Palo Alto Networks (PANW) and VMware (VMW) from next-generation software-defined networking technology.

Software-defined networking centralizes control of network security, storage systems and servers connected to networks. Software-defined networking performs tasks usually done by specialized hardware.

“Incorporating software-based networking technologies into cybersecurity strategies can deliver traffic visibility, integrate analytics technologies, and automate security responses,” added Faucette.


IBD’S TAKE: Cisco, Apple and Microsoft are among cash-rich tech companies that could increase stock buybacks if the Trump administration’s proposal to allow companies to bring foreign profits into the U.S. at a reduced tax rate is approved by Congress. Cisco also pays a dividend. Learn more at IBD Stock Checkup.


Meanwhile, cybersecurity has room to grow, now comprising only 6% of Cisco’s total revenue. Cybersecurity is one key to Cisco’s shift to a software-and-services business model from its origins in internet routers and switches. With security and other initiatives, Cisco’s goal is to grow recurring revenue from software subscriptions.

Cisco’s security revenue jumped 14% to $528 million in the January quarter, growing at roughly twice the rate of the overall market. Security products are about 6% of Cisco’s total revenue.

“Cisco holds leading share of the firewall market and its end-to-end portfolio is unmatched by peers,” said Faucette.

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