Cisco Systems, Inc. (NASDAQ: CSCO) is hard to argue about it being a bad quarter.  It was stellar with earnings above estimates at $0.42 EPS and $10.4 billion in revenue vs. Thomson Reuters estimates of $0.39 EPS and $10.24 billion in revenues..  And almost $40 billion in cash to boot.  The stock had run up enough that profit taking has come into play.  But there is something else that is getting hard to ignore.  Analysts are either refusing to chase the stock higher, or in some cases it looks and feels as though they are rethinking their aggressive growth rates.

Auriga maintained a Hold rating and $25 target… “…while we are becoming incrementally more positive on the name longer-term, with our estimates largely unchanged, we think shares are close to fair value…. we remain on the sidelines until we see more tangible evidence of this strategic improvement in our number. We reiterate our Hold rating and maintain our $25 price target on modestly higher estimates.”

Other calls are as follows:

• UBS maintained a Neutral rating, although it did raise estimates and it has a new price target of $29.00.
• Morgan Stanley maintained an Equal-weight rating, although estimates were raised slightly out to 2012, partly on higher income and partly on lower tax rates.  Here was the big comment: “their growth appears to be peaking.”
• Canaccord Adams maintained a Buy and raised the target to $29.00 from $27.50.
• Barclays maintained n overweight rating and $31 price target, but these estimates for this year and next were taken down marginally.
• Citigroup maintained a Buy rating, but the target is only $28 per share.

As we noted yesterday, the Whispernumber.com target was $0.41, so now Cisco has beat the Whispernumber.com figure for 6 of the last 7 reports.

We also noted how options traders going into the report were not expecting more than $1.00 move in either direction.  The notion that Cisco was up 3% into earnings helped curb that expectation, and that is roughly what has been given back today.

Cisco shares peaked above $30.00 in late 2007 before the recession started becoming more and more inevitable and obvious.  The 52-week trading range is $17.61 to $27.74, but this one dipped under $15 in late 2008 and then again in the peak of panic selling in March 2009.

With shares down at $26.04, the stock is still up if you take away yesterday’s pre-earnings hyped run.  The takeaway is that value is getting very close to fair, even if the overall bias is still positive.

Cisco’s key moving averages are $26.44 for the 50-day moving average and $24.12 for the 200-day moving average.

The mean price target from analysts per Thomson Reuters has not yet adjusted, but this was $29.79 going into earnings.  If there is not a slowing of growth in the general economy and if we can avoid a slowdown in 2011 then this could get to $30 without there being a big premium in valuations.

The problem is that even at $30.00, that leaves 15% upside from here, 12.3% upside from yesterday’s pre-earnings close, and leaves only 8.15% upside from its 52-week high of $27.74.

JON C. OGG

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