Recent reviews by Oppenheimer analysts on tech companies Cisco Systems, Inc. (NASDAQ:CSCO) and salesforce.com, inc. (NYSE:CRM) present a rather bright picture for the near future. One analyst met with Cisco’s SVP to discuss the company’s positive attitude towards the Open Compute Project and its product portfolio status. On the other hand, Salesforce.com appears to surge in broadening its customer base as another analyst explains why he is confident in the company’s momentum. Let’s take a look.
Cisco Systems, Inc.
Oppenheimer analyst, Ittai Kidron, met with Cisco management to discuss future strategy. Among the subjects, the conversations were centered around general company strategy, trends in networking, the white-box phenomenon (Open Compute Project – OCP), and cloud providers. Kidron’s takeaways from the meeting led him to maintain his Outperform rating with a $30 price target.
The analyst explains Cisco attitude towards current technology trends, especially the spread of the white-box movement and other phenomena alike. He states, “What surprised us the most is Cisco’s willingness to embrace any model (including white-box, software-only, custom ASICs) to maintain and grow its networking footprint with key customers.” He continues, “We believe that this openness (an initiative of the new CEO) can open up incremental opportunities with cloud providers and slow Cisco’s market share decline.” Cisco might also license its network operating system, NX-OS, to these third parties. Kidron comments, “Although this would be unusual, this illustrates Cisco’s commitment to work with customers to win business.”
Cisco’s latest addition to its product portfolio, the ASIC, seems promising in the eyes of the analyst. The product features improved cost efficiency, reduced power usage, security improvements and more. The analyst comments, “We believe these features are important in large-scale deployments.”
Overall, the discussions convinced the analyst to have an optimistic outlook on the company’s overall performance in the year to come. Kidron states, “Cisco continues to face several headwinds in the form of cloud adoption and competition. Nonetheless, the company’s newly found flexibility and commitment to do what it takes to keep customers could slow share losses.” He continues, “With 25G now available and a more aggressive approach, we see potential for growth later in the year.”
According to TipRanks, Ittai Kidron’s predictions are profitable 45% of the time, delivering an annual average loss per recommendation of (2.2%). Among Kidron, 18 more analysts gave CSCO a Buy rating, five remained on the sidelines and one analyst gave a Sell rating. Overall, all ratings amount to a 12-month price target of $29.55, marking a 6.5% upside from current levels.
Another Oppenheimer analyst, Brian Schwartz, describes how he gained confidence in Salesforce.com’s current business momentum. The company’s recent expansion apparently stems from its various efforts to enhance and diversify its products. Ultimately, Schwartz reiterates an Outperform rating with a $88 price target.
The analyst shares his confidence in the company’s recent operations, taking the company to new heights. He states, “The evolution of salesforce.com into a broader customer success platform supplier (sales, service, marketing, analytics, development) is proceeding at an aggressive pace, driving double-digit growth in the core sales segment, and putting in place a larger and longer term opportunity that it enhances with innovations and acquisitions of value-added services to an increasingly larger customer base (pricing optimization, predictive analytics, verticals specialization, etc.).”
Salesforce.com’s business development also projects a great deal of confidence for the analyst. He adds, “We feel comfortable with the current business momentum and opportunity for salesforce.com after detecting healthy software spending trends for SaaS transformation IT initiatives from recent partner checks, from management meeting takeaways, as well as potential positive catalysts for the stock that we see as the business progresses through the year.”
In terms of long-term growth, the analyst believes the company is well equipped and healthy. He states, “We view salesforce.com as one of the best positioned IT suppliers for share gains over FTM. Longer term, we think the combined effect of new products and rapid product updates with enhanced function can drive sustained billings, revenue and FCF growth of 20%+ year/year for CRM.”
According to TipRanks, 60% of Schwartz’s recommendations are profitable, delivering an average return per recommendation of 14%. Seventeen other analysts gave CRM a Buy rating and two remained on the sidelines. The average 12-month price target is $86.95, marking a 16% upside from current levels.