Credit Suisse initiated new coverage on shares of Cisco with a very unambitious Underperform rating. The firm issued a $21.00 price target, versus a $24.80 closing price on Wednesday.
Analyst Kulbinder Garcha believes that software-defined networking is going to be a threat to the traditional networking giants. He still thinks that Cisco is a high-quality company, but it also may be the most vulnerable of the old oligarchy. His biggest concern is that software-defined networking will shrink gross margins, even as Cisco tries to increase its services in the revenue mix.
Cisco has traded in a 52-week range of $16.68 to $26.49, and the consensus analyst target price is $26.77, according to Thomson Reuters. Its shares were down 1.2% at $24.48 in early Thursday morning trading. The call also was negative, or at least cautious, on two others.
Juniper Networks Inc. (NYSE: JNPR) was started as Neutral. Its assigned price target was $20.00, versus a $21.66 close on Wednesday. Juniper shares were down only 0.4% at $21.58, against a 52-week range of $15.62 to $22.98. We would caution that the $20.00 price target is only marginally lower than the consensus price target of $21.32.
Ubiquiti Networks Inc. (NASDAQ: UBNT) was given a cautious Neutral rating as well, and it had the least negative bias in Garcha’s call. He said:
We believe that Ubiquiti has created a relatively unique business model that can disrupt several markets in the networking space over time. However, we believe shares are fully valued, with strong near-term revenue momentum offset by medium-term competitive risks and possible margin pressure.
His target price of $33.00 was barely under the $33.14 closing price on Wednesday.
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