On Monday (NASDAQ:MNDY), Evercore ISI maintained its Outperform rating and $60.00 price target for Cisco (NASDAQ:CSCO). The firm anticipates that Cisco will report a strong quarter and may provide guidance for the January quarter that surpasses current market expectations. Additionally, there is a possibility that the forecasts for fiscal year 2025 will be raised, although it is uncertain whether this will occur in the FQ1 report.
Cisco is scheduled to report its earnings on November 13th, after the market closes. Analysts at Evercore ISI suggest that the current revenue estimates for the January quarter and FY25 might not fully account for the potential rebound in the networking sector. They note that companies like Extreme Networks (NASDAQ:EXTR) and Juniper Networks (NYSE:JNPR) have indicated sequential growth in enterprise and service provider networks. Cloud networking strength is also highlighted, with Cisco's relatively small business in this area gaining momentum, including notable achievements such as the meta leaf win and potential Microsoft (NASDAQ:MSFT) ramps.
Despite warnings from Value-Added Resellers (VARs) like CDW (NASDAQ:CDW) and Insight Enterprises (NASDAQ:NSIT) about a weak enterprise networking environment, Evercore ISI believes the situation is improving sequentially. This may reflect more of a small and medium-sized business dynamic. With easier comparisons ahead, Cisco is expected to return to growth in the January-quarter guidance.
The integration of Splunk (NASDAQ:SPLK) is another focal point. Cisco has expressed positivity about the early stages of the acquisition, and as long as there are no execution errors, the revenue aspect of the deal should meet expectations. Evercore ISI sees an opportunity for operating margin improvement as Cisco has not factored in any operational expenditure synergies in their FY25 guidance.
In summary, Evercore ISI's stance is that Cisco stands to benefit from a gradual recovery in the networking market. Coupled with a successful Splunk integration and potential operational synergies, the firm believes Cisco is on track for consistent financial performance improvements throughout FY25.
InvestingPro Insights
Cisco's strong market position and financial health align with Evercore ISI's optimistic outlook. According to InvestingPro data, Cisco boasts a substantial market capitalization of $231.7 billion, underlining its industry dominance. The company's P/E ratio of 22.71 suggests investors are willing to pay a premium for its shares, possibly due to its growth prospects and market leadership.
InvestingPro Tips highlight Cisco's financial stability and shareholder-friendly policies. The company has raised its dividend for 14 consecutive years, demonstrating a commitment to returning value to shareholders. This consistent dividend growth, coupled with a current dividend yield of 2.76%, may appeal to income-focused investors.
The stock's recent performance has been impressive, with a 28.66% price total return over the past three months. This aligns with Evercore ISI's expectation of a strong quarter and potential upside in guidance. However, investors should note that the RSI suggests the stock is in overbought territory, which could indicate a potential short-term pullback.
For readers interested in a deeper analysis, InvestingPro offers 11 additional tips for Cisco, providing a more comprehensive view of the company's prospects and potential risks.
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