Analysts reset Cisco stock price targets after earnings

Back in the day — OK, in early 2002 — Cisco Systems briefly held the title of the world's most valuable company.

It came on Jan. 2, 2002, when Cisco ( CSCO ) shares closed at $80.06, with a market capitalization of $555.4 billion. That just passed the market cap of Microsoft ( MSFT ) , which ended the day at $541.6 billion after its shares fell $7.63 to $104.06.

The reason was speculation Microsoft would settle its long-running antitrust suit with the Justice Department. The settlement came later that year.

Cisco didn't keep its lofty position for too long, however. The peak came as the Dot.Com bubble was about to burst.

Exxon Mobil ( XOM ) and Microsoft competed for many years. Apple ( AAPL ) has mostly had the title since 2011, although Microsoft took it back in 2023 and 2024.

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Cisco's market cap, in fact, has declined as Techland has had to weather dramatic changes in technology generally, the stresses of three recessions and the Covid-10 pandemic.

The market cap ended Aug. 15 at $195.52 billion, down 65% from the 2000 high. Cisco lost investor favor because its core businesses — building networking products and services and providing much of the guts of the World Wide Web — were surpassed by two big forces:

• Apple's influence in making mobile devices ubiquitous.
• Cloud computing and, soon, probably artificial intelligence, with Microsoft and ( NVDA ) a major player.

Apple's market cap was at $3.41 trillion on Aug. 16; Microsoft's was $3.13 trillion.

Plus, Cisco's addressable market is highly competitive with financially strong rivals such as Arista Networks ( ANET ) , Juniper Networks ( JNPR ) , and Chinese company Huawei.

Cisco's big day in the sun

But on Thursday, as stocks enjoyed a huge rally on decent inflation and jobs news, Cisco was a big star, with its shares up 6.8% to $48.53, its best one-day percentage gain since November 2020.

Cisco was the top performer among the 30 stocks in the Dow Jones Industrial Average, ahead of Apple (up 1.4% to $224.72) and Microsoft, up 1.2% to $421.03.

Cisco also had had the seventh biggest percentage gain among Standard & Poor's 500 stocks, and it was the third biggest gainer among Nasdaq-100 stocks.

All because Cisco reported better-than-expected fiscal-fourth-quarter results. It said it hopes to generate $1 billion in AI-related business in the next year, and the company will cut 7% of its worldwide work force. Not because it wants to cut. Rather, it needs to rework the business to help customers modernize their existing systems to get the most from AI.

For a change, the company saw "steady customer demand," Chief Executive Chuck Robbins said, and Cisco believes it has the expertise to offer companies secure and reliable networks and related systems to deal with new AI applications.

The analysts weigh in

Investment analysts, based on public notes, were mixed about Cisco's earnings and prospects.

New Street upped its rating on Cisco to buy with the $57 target.

Deutsche Bank analysts raised its target to $53 from $52, but it gave the stock only a hold rating. The company is "nearing normalcy," the note said.

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Oppenheimer analyst Ittai Kidron was modestly bullish, keeping an outperform rating on the stock with a $54 price target. He didn't like the company's guiding earnings lower in the September quarter. Cisco has too much inventory on the books and must work it off, he noted. But he likes the long-run prospects.

Jefferies maintained a buy rating on the stock but cut its price target to $53 from $56. It has concerns about the prospects for Splunk, the software company Cisco bought for $28 billion. Splunk's software enables searching, monitoring, and analyzing machine-generated data via a web-style interface.

Barclays trimmed its target to $49 from $50 with an equal-weight rating. Cisco's business appears to be stabilizing after deciding to move quickly toward AI-related products. Splunk is helping.

Bank of America's Tal Liani reiterated a buy rating on the stock with a $60 target. Cisco's fourth-quarter results were better than expected, he wrote. And order trends are improving.

Morningstar analyst William Kerwin called the fourth-quarter results "generally positive" in a conversation with Yahoo Finance UK. He likes the AI initiative, but he warned that Cisco's strength is still "campus and on-premises networks" such as office buildings and campuses, particularly in Wi-Fi and other areas requiring "slower speeds."

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