Oppenheimer Remains Bullish as Cisco Systems (CSCO) Targets Growth in Recurring Revenue Streams

Oppenheimer maintained an Outperform rating and $32.00 price target on Cisco (NASDAQ: CSCO) as the company targets growth in software and subscription-based recurring revenue streams. Analyst Ittai Kidron estimates that product recurring revenue could grow at a 19.3% CAGR through FY20, driven primarily by growth in software and subscription solutions in collaboration, security, and wireless.

Kidron commented, "In recent years, Cisco has worked to shift its business toward a more predictable model by targeting growth in software and subscription-based recurring revenue streams. Although significant progress has been made, it's not well understood by investors who remain indifferent thus far. Our analysis suggests that (1) recurring product revenue contribution has more than doubled since FY08 and will more than double again by FY20; (2) more revenue is locked in entering quarters (~20% of NTM revenue in short-term deferred vs. ~15% before FY08); (3) leasing activity has increased 2.6x since FY08, raising customer stickiness; and (4) more aggressive M&A is needed. It would take time for investors to credit Cisco, yet we feel it's on the right long-term path for multiple expansion. Maintain Outperform."

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 $25.88 yesterday.

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