Cisco Systems Inc. (CSCO) was downgraded to Neutral from Buy at Banc of America Securities, due primarily to valuation. Analyst Tim Long noted that Cisco’s business might currently be as good as it gets and he sees limited upside to the shares from the current levels. He believes growth will slow over the next few quarters as the headcount benefit is appreciated, and that there is less scope for market share gains and margins have peaked. The price target for CSCO is $30.00, only 3% to 4% higher than current prices.
Now that CSCO shares have approached this $30.00 mark, shares are right back where they were in January 2004 before the shares went South. That was way back before the Scientific-Atlanta acquisition. The valuation call is one that can always be justified, but it sure seems as though the prospects this time around are much higher since it has made acquisitions since then and since it has so many more avenues to grow its top-line and bottom-line results. CSCO shares are down 1.3% at $28.54 on more than 400,000 shares pre-market.
Jon C. Ogg
January 16, 2006
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