Cisco (CSCO) Subscription Transition Underscored Revenue Opportunity - Wells Fargo

September 16, 2021 7:56 AM EDT
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Price: $55.69 -0.91%

Rating Summary:
    32 Buy, 23 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 5 | Down: 12 | New: 29
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Wells Fargo analyst Aaron Rakers reiterated an Overweight rating and $70.00 price target on Cisco (NASDAQ: CSCO) after attending the company's first Investor Day since 2017 on 9/15. The analyst walked away positive on the Signature Pick name on the belief that the company's presentations / comments reinforced his positive thesis.

The analyst stated "Cisco's presentations emphasized the company's transition to expanding subscription software revenue contributions—incrementally noting that it now sees ~29% of their total Infrastructure Products revenue via software with two-thirds of this derived from subscription (vs. a total 14%software rev. contribution in F2017). Total subscription revenue totaled ~$11.9B inF2021, representing a F2015-F2021 CAGR at +23%. Combined with maintenance, Cisco generated ~44% of total revenue via subscription software + maintenance, which is expected to expand to >50% of total revenue by F2025. Subscription software revenue is implied to expand from ~33% of total product rev. in F2021 to ~45% by F2025. Cisco incrementally provided an ARR metric—$22.3B exiting F2021, which represents a+11% CAGR since F2019. Cisco's presentations outlined a focus on driving increasing EA traction; one presentation noting that EAs have on average seen a 35% higher spend w/in12-months vs. pre-EA spend levels."

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 $57.56 yesterday.



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