Cisco just had a massive rally. HSBC says the stock still has momentum
Cisco is showing no signs of losing steam following its blowout fiscal third-quarter earnings report, according to HSBC. The investment bank upgraded the software name to buy from hold. It also hiked its price target on shares to $137 from $77, implying nearly 19% upside from Thursday’s close. “We believe 3Q supports a thesis that Cisco’s AI role is becoming structural and that AI revenue is having a larger financial impact than we had expected,” analyst Stephen Bersey said in a note to clients. Shares surged 13% on Thursday following Cisco’s better-than-expected report. For the quarter ended April 25, Cisco posted $1.06 per share after adjustments versus the $1.04 expected by analysts polled by LSEG. It also clocked revenue of $15.84 billion, or more than the $15.56 billion expected by the Street. CSCO YTD mountain Shares have jumped 50% in the year to date. Cisco also sees that its adjusted earnings per share would fall in the range of $1.16 to $1.18 for the fiscal fourth quarter, topping analysts’ consensus estimate of $1.07 per share. Looking ahead, the biggest growth drivers for Cisco will likely be hyperscaler AI build-outs and enterprise artificial intelligence networking upgrades, in addition to campus modernization as requirements for traffic, security, and latency increase, according to HSBC. “Despite gross margin pressure, management has credible offsets through pricing, tighter contract terms, supply chain commitments, [operational expenditure] discipline, and lower memory utilization within designs,” Bersey wrote. HSBC’s call falls in line with consensus on the Street. Of the 26 analysts covering Cisco, 19 have a buy or strong buy rating on the stock, per LSEG data. Several other shops on the Street, including Morgan Stanley , have also recently told their clients to scoop up Cisco.
