Morgan Stanley analyst James Faucette weighs in on shares of Cisco Systems, Inc. (NASDAQ:CSCO) ahead of fourth-quarter results. With expectations for mixed results for the quarter, Facuette reiterates an Equal Weight rating on CSCO with a price target of $28, marking a nearly 7% downside from where the shares last closed.

Facuette wrote, “We think the recent stock price appreciation partially reflects incremental confidence in Cisco’s security business as a meaningful driver of earnings growth. However we also acknowledge the recent market decline in interest rates, most notably after the Brexit vote, which has in turn driven dividend yielding stocks in our coverage universe. Cisco’s current dividend of $0.26 per share is part of an estimated $8.9bn in shareholder return in FY16, and with a remaining stock repurchase authorization of $16.2bn we expect Cisco stock to continue to be viewed favorably in the current market environment.”

From Facuette’s assessment, based on mixed July quarter channel checks, the analyst has expectation to believe the company either fell in-line with reseller targets amid the quarter, or dipped under. Though security activities persist on the rise, product cycle weakness persists due to weak campus demand and pricing pressures. On the back of declining yields, Faucette surmises these decreases have led to recent stock price appreciation.

Explaining his caution ahead of results, Facuette elaborates, “We expect a largely in-line Q4 and a conservative outlook from management. Acknowledging continued security momentum, we seek better balanced contributions from multiple product cycles before becoming more constructive on the stock.” The analyst admits the company has outclassed his expectations over the past two quarters, but remains hesitant until stronger results prove to Facuette that investing in Cisco will not be such a risk.

According to TipRanks, five-star analyst James Facuette is ranked #396 out of 4,110 analysts. Facuette has achieved a high success rate of 77% and realizes 8.7% in his yearly returns. When recommending CSCO, Facuette earns 15.1% in average profits on the stock.

TipRanks analytics exhibit CSCO as a Buy. Based on 23 analysts polled by TipRanks in the last 3 months, 16 rate a Buy on Cisco, 6 maintain a Hold, while 1 issues a Sell. The consensus price target stands at $32.00, marking a close to 4% upside from where the stock is currently trading.

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