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Bank of America reiterated its buy rating on Cisco Systems. Should I invest in September?

By: Invezz
Bank of America reiterated its buy rating on Cisco Systems. Should I invest in September?

Cisco Systems, Inc. (NASDAQ: CSCO) shares have advanced more than 25% since the beginning of 2021; the company reported better than expected fourth-quarter results this Wednesday and expects to see strong trends in the upcoming quarter.

Fundamental analysis: Cisco expects 7.5% to 9.5% growth in revenues for the first fiscal quarter

Cisco Systems’s business continues to perform well, and the company reported better than expected results this week. Total revenue has increased by 8.1% Y/Y to $13.13 billion, while the fourth quarter GAAP EPS was $0.71 (beats by $0.02).

Revenue from the product segment has increased by 10% to 9.72 billion, while the revenue from the service segment increased 2.6% to $3.41 billion. The momentum the company achieved during the third quarter accelerated through the fourth quarter, and Cicso delivered robust revenue growth, increased earnings, strong margins, and record operating cash flow.

“We had an outstanding Q4 performance and fiscal year revenue reflecting strength across our portfolio, customer segments, and geographies. Our product order growth was the highest we’ve seen in over a decade, and we’re continuing to see strong customer reception to the accelerated investments in software and subscriptions,” said CEO Chuck Robbins.

On a full fiscal year basis, total revenue has increased from $49.30 billion in the 2020 fiscal year to $49.81 billion in the 2021 fiscal year, while the net income decreased from $11.21 billion in the 2020 fiscal year to $10.59 billion in 2021 fiscal year.

For the 2021 fiscal year, Cisco generated around $15.5 billion in operating cash flow and returned over $9 billion to shareholders through share repurchases and dividends. Cisco increased its dividend for the 10th consecutive year in fiscal 2021, and the company continues to maintain a strong balance sheet to fuel its organic and inorganic growth initiatives.

Cisco Systems updated financial guidance for the first fiscal quarter of 2022 and expects 7.5% to 9.5% growth in revenues, while the GAAP EPS should be between $0.61 to $0.66. For the 2022 fiscal year, Cisco expects revenue growth to be in the range of 5% to 7% compared with the 2021 fiscal year, while the non-GAAP EPS should be in a range from $3.38 to $3.45 also up 5% to 7% year-over-year.

Credit Suisse raised its price target to $56 from $46 on Cisco shares; Bank of America reiterated its buy rating and assigned a price target of $64 while Citigroup keeps a neutral rating. Cisco trades at around sixteen times TTM EBITDA, and with a market capitalization of $245 billion, shares of this company are reasonably valued.

Technical analysis: Cisco shares remain supportedData source: tradingview.com

Cisco shares remain supported after better than expected fourth fiscal quarter results, and according to technical analysis, there is no risk of the positive trend reversal. Rising above $60 supports the continuation of the bullish trend, and the next price target could be located around $62.

On the other side, if the price falls below $55, it would be a “sell” signal, and we have the open way to $50.

Summary

Cisco Systems increased its revenue forecast for the first fiscal quarter during the fiscal fourth-quarter earnings call, and the consistent strong execution should drive healthy growth in the next quarter. Credit Suisse raised its price target to $56 from $46 on Cisco shares; Bank of America reiterated its buy rating and assigned a price target of $64 while Citigroup keeps a neutral rating.

The post Bank of America reiterated its buy rating on Cisco Systems. Should I invest in September? appeared first on Invezz.

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