Why Cisco Stock Could Double From Here

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Cisco is well-positioned to benefit from an expected acceleration in enterprise tech spending.

Gabriel Bouys/AFP via Getty Images


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. 

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“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.

Write to Eric J. Savitz at eric.savitz@barrons.com