Goldman Sachs Downgrades Cisco (CSCO) to Neutral
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(Updated - June 15, 2016 9:30 AM EDT)
Goldman Sachs downgraded Cisco (NASDAQ: CSCO) from Buy to Neutral with a price target of $32 (from $35). Analyst Simona Jankowski said the company was "running out of levers" to drive EPS upside.
The analyst explained, "We downgrade Cisco to Neutral from Buy on decelerating EPS growth (4.6% in FY16-18E) and what we view as modest downside risk to Street estimates. In our view, three of the key levers that drove outsized EPS CAGR of 7.6% over the last 5 years are now largely exhausted, including 1) server share gains, which are now leveling off, 2) expanding operating margins, as OMs are now at a 10-year peak, and 3) capital allocation, as buybacks should slow post the 24% dividend increase this year (to a 3.6% yield/44% payout), with $12.3bn debt raised and 90% of FCF returned over the last 3 years."
Shares of Cisco closed at $28.96 yesterday.
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