UPDATE: Barclays Downgrades Cisco (CSCO) to Equalweight, Stock Seen Range-Bound in 2014

March 18, 2014 6:45 AM EDT Send to a Friend
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Price: $23.62 +1.55%

Rating Summary:
    31 Buy, 19 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 25 | New: 20
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(Updated - March 18, 2014 10:38 AM EDT)

Barclays downgraded Cisco (NASDAQ: CSCO) from Overweight to Equalweight with a price target of $23.00 (from $25.00). Analyst Ben A. Reitzes thinks shares could be range-bound over the next year.

"We believe uneven demand trends, secular headwinds, and a lack of major catalysts could keep shares range-bound over the next year. We acknowledge that expectations are low and valuation appears attractive relative to peers and Cisco's dividend yield should help support shares in the low $20 range. However, material upside to estimates does not seem likely at this point and it is also unlikely for the shares to re-rate higher until it becomes clear that the company can successfully execute on its major product transitions and fully participate in Cloud and software defined networking (SDN)," said Reitzes.

"We believe revenue and EPS estimates for the next two quarters or so are achievable with slight upside potential given backlog trends. However, recent checks indicate a bit of fatigue in the channel and a lack of conviction as to whether Cisco's product transitions will deliver the appropriate follow-through to result in significant upside," he added. "While the next two quarters may be OK, we are lowering our annual estimates to reflect our more cautious views around uptake in new products and secular headwinds. We also believe the slower uptake in high-end products could result in gross margins at the lower end of the company's long-standing target of 61-62%."

EPS/revenue estimates are $2.00/$46.4 billion and $2.12/$48.1 billion for 2014/15. 2015 estimates were cut from $2.18/$48.5B.

For an analyst ratings summary and ratings history on Cisco click here. For more ratings news on Cisco click here.

Shares of Cisco closed at $21.51 yesterday.


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