Sterne Agee Pounds the Table on Cisco (CSCO); Sees Stock Near Bottom
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Price: $111.58 +1.82%
Rating Summary:
35 Buy, 27 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
35 Buy, 27 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Sterne Agee's Shaw Wu is making a tough case for shares of Cisco (Nasdaq: CSCO) Monday, suggesting the stock is currently very near a bottom. The call follows a move below the $15 level in Cisco shares on Friday of last week, the first time the stock has been to such a level since the beginning of 2009.
While maintaining a Buy rating, Wu reduced his price target on Cisco shares from $29 to $25.
The Sterne Agee analyst believes a turnaround at Cisco will happen despite a large number of skeptics on the Street. Wu insisted "Cisco is fixable and not structurally flawed, but we admit we need to see more dramatic steps be taken."
Wu suggested such steps as doubling the dividend or cutting prices. The analyst noted recent customers which indicated while Cisco's products still deserve a premium, "50 to 100 percent seems a bit excessive." Consequently, Wu cut his gross margin estimate on Cisco from 62 percent to just over 55 percent.
"We believe the Cisco story is getting better, and we'd rather be a buyer at these depressed levels than wait for obvious evidence of improvement. By then it may be too late," Wu said.
The analyst lowered his FY12 EPS estimate on Cisco from $1.80 to $1.50 and his sales estimate from $46.5 billion to $45.9 billion. A consensus of Wall Street analysts currently sees Cisco reporting FY12 EPS of $1.73 on sales of $45.52 billion.
Traders in Cisco are buying the stock Monday afternoon, possibly on the back of the bullish note. The stock last traded at $15.15, up 1.2 percent from Friday's closing price.
While maintaining a Buy rating, Wu reduced his price target on Cisco shares from $29 to $25.
The Sterne Agee analyst believes a turnaround at Cisco will happen despite a large number of skeptics on the Street. Wu insisted "Cisco is fixable and not structurally flawed, but we admit we need to see more dramatic steps be taken."
Wu suggested such steps as doubling the dividend or cutting prices. The analyst noted recent customers which indicated while Cisco's products still deserve a premium, "50 to 100 percent seems a bit excessive." Consequently, Wu cut his gross margin estimate on Cisco from 62 percent to just over 55 percent.
"We believe the Cisco story is getting better, and we'd rather be a buyer at these depressed levels than wait for obvious evidence of improvement. By then it may be too late," Wu said.
The analyst lowered his FY12 EPS estimate on Cisco from $1.80 to $1.50 and his sales estimate from $46.5 billion to $45.9 billion. A consensus of Wall Street analysts currently sees Cisco reporting FY12 EPS of $1.73 on sales of $45.52 billion.
Traders in Cisco are buying the stock Monday afternoon, possibly on the back of the bullish note. The stock last traded at $15.15, up 1.2 percent from Friday's closing price.
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