Credit Suisse analyst Kulbinder Garcha reiterated an Underperform rating on shares of Cisco Systems, Inc. (NASDAQ:CSCO), but raised the price target to $24 (from $22), following better-than-expected quarterly results, driven by growth in Asia. F3Q16 revenue rose 3% from the year-earlier period to $12 billion, beating consensus estimate of $11.97 billion. For Q4, the network equipment maker expects earnings of $0.59-0.61 per share, slightly better than consensus estimate of $0.58.
Garcha noted, “Cisco delivered solid F3Q16 results, with Revenues and EPS of $12.0bn/$0.57 vs. ex-STB consensus estimates of $12.0bn/$0.54. Here, we note that the source of strength was the beat in services, with overall GM also beating expectations at 65.2% vs estimates at 63.2%. We also note that F4Q16 guidance for next quarter is solid at +1.5% y/y midpoint ex-STB Revenue growth/$0.60 EPS.”
“We adjust our FY16/17 revenue estimates to $49.1bn/$49.3bn (from $49.4bn/$49.9bn), with EPS of $2.34/$2.34 (from $2.28/$2.26). Our long-term concerns remain that the company is increasingly challenged by SDN, continues to lose share in the 10GbE & above switching market. Currently, we see Cisco at peak operational performance, and see limited upside from here,” the analyst concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Kulbinder Garcha has a yearly average return of 6.3% and a 50.6% success rate. Garcha has a -12.7% average return when recommending CSCO, and is ranked #389 out of 3929 analysts.
Out of the 32 analysts polled by TipRanks, 22 rate Cisco stock a Buy, 9 rate the stock a Hold and 1 recommends to Sell. With a return potential of 9%, the stock’s consensus target price stands at $30.54.