Cisco Systems lifted to Buy at HSBC and New Street Research

Cisco Systems (NASDAQ:CSCO ) received upgrades from both HSBC and New Street Research in notes on Friday, with analysts citing improving order flows, normalized inventories, and a strategic focus on high-growth areas as key reasons for their positive outlook.

HSBC upgraded Cisco to a Buy rating, raising its target price to $58 from $46.

The bank praised Cisco's "politically tactful" guidance for FY25, noting that while the company’s recent fourth-quarter results were in line with estimates, its guidance appeared conservative.

Despite a 7% workforce reduction announcement this week, HSBC expects Cisco’s non-GAAP EPS to rise at a compound annual growth rate (CAGR) of 11.6% over 2024-2027, with double-digit growth anticipated in networking revenue for most of FY25.

"The company intends to offset the layoffs by hiring more people in lower-cost geographies, but is also hiring in high-potential priority areas," wrote the bank

HSBC also highlighted that Cisco's shares are trading at a discount compared to the broader sector, making the stock an attractive buy.

Similarly, New Street Research upgraded Cisco to Buy with a $57 target price, pointing to a bottoming out of core revenues and improving order flows.

The firm noted that orders have surged by more than 30% sequentially, marking the highest quarter-on-quarter growth in two decades.

New Street Research believes that Cisco is poised to return to growth in the second half of FY25, driven by its transition to subscription-based and software-defined products, which are expected to continue expanding margins.

" Cyclical headwinds are now behind us and Cisco is returning to growth," wrote New Street. "The transition to subscription-based and software-defined products will drive continued margin expansion."

Source: Investing.com