Cisco Systems Inc. (NASDAQ:$CSCO) announced it had beat the Street’s 2018 fiscal first-quarter expectations on Wednesday after market close, causing a continual rise in its shares starting Monday. Shares reached highs not seen since February 2001, while analysts attempted to raise their price targets on Cisco stock. With trading up 1.5% at $36.44, there has been a 20.6% gain year-to-date (YTD) and S&P has increased 15.4% over the same period.
After eight consecutive quarters of year-over-year (YOY) sales declines, Cisco plans to return to revenue growth in the second quarter, forecasting a revenue growth of between 1% to 3%, or, between $11.7 billion to $11.93 billion for the current quarter.
“Sustainable” Growth
RBC Capital Markets (Privately-Traded) state that “Cisco is executing according to plan and we are impressed by the security growth, recurring revenue growth, and the steady capital allocation program,” and have subsequently lifted their price target on Cisco from $36 to $40, based on information from the earnings report.
Simon Leopold of Raymond James (NYSE:$RJF) has increased his price target from $35 to $37 and has approved of Cisco’s transition to software-based products as the driving force behind deferred revenue growth. The deferred revenue, also known as payments received on long-term contracts, is up 10% YOY to $18.6 billion in Q1. This includes a 16% growth in sales from subscription-based and software offerings, as well as a 37% boost in recurring software and subscription offers. Leopold views the forecasts for a return to YOY revenue growth as “sustainable.”
Deutsche Bank (NYSE:$DB) analysts highlighted the upside from trends in improved enterprise and IT spending, and so decided to raise their price target from $40 to $45. Morgan Stanley similarly raised its price target to $39 and indicated that a greater integration of security and networking decisions would strengthen Cisco’s business.
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