Systems stock was entirely left out of the 2020 tech rally, falling 3.5% while the Nasdaq Composite rallied 44%. But as investors looked for laggards—and shifted to tech shares well-positioned to benefit from an expected acceleration in enterprise tech spending in the 2021 second half—Cisco stock has turned around. The stock is already up 21% for the year to date. And at least one analyst thinks the stock can go higher—a lot higher—from here.
In a lengthy research note Monday, Evercore ISI research analyst Amit Daryanani laid out a case for how Cisco (ticker: CSCO) stock can eventually hit $100. He repeated his Outperform rating and lifted his official target price to $62 from $58. And investors are receptive to Daryanani’s message: Cisco stock on Monday is up 2.2% to $53.24. But longer term, the analyst’s thinking bigger.
“Cisco remains an attractive asset in a post-Covid world,” the analyst writes in a research note. He thinks the stock can double from here, driven by a return to offices, the increased adoption of hybrid cloud networks, and Cisco’s increasing participation in public cloud infrastructure. He thinks the company can post mid-single-digit revenue growth organically, with additional growth via acquisition.
“We see potential for an acceleration in broader network spend,” he writes, given an improving IT environment, and growing adoption of key technologies like 5G, Wi-Fi 6 and 400 gigabit networking technology. The analyst also thinks Cisco’s strong-free-cash-flow generation and profitability are underappreciated.
Near-term, he expects some easing of commodity cost headwinds, with revenues expected to accelerate as a return to work spurs demand growth for campus networking gear. Bottom line: he thinks Cisco is positioned for “an outsize postpandemic recovery.”
Daryanani also thinks the company will benefit in coming quarters from easy year-ago comparisons—he notes that trailing-12-months revenue was down 7%. He notes that IT spending should grow about 6% in the second half—and he thinks Cisco can potentially beat that.
The analyst also notes that Cisco has scheduled a Sept. 15 analyst meeting which could serve as a new catalyst for the stock.
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