Analysts have begun lining up behind Cisco (NASDAQ:CSCO) over the past few days. The company reports earnings next Wednesday, and analysts expect 46 cents a share on roughly $11.6B in revenue for the second quarter. Given the timing of these upgrades, they could be the catalysts that get the stock moving again as the stock is cheap for myriad reasons (See 4 reasons below).
Key recent catalysts for Cisco:
- Piper Jaffray just upgraded the shares to "overweight" from "neutral". It also upped its price target to $22 a share from $20.
- Goldman Sachs also added the shares to its Conviction Buy list based on solid channel checks.
- A few days ago, Oppenheimer also reiterated its "buy" rating on the shares.
- Even Jim Cramer piped in on the shares this morning on CNBC, liking the stock based on the robust spending he sees from Telcos AT&T (NYSE:T) and Verizon (NYSE:VZ).
Four reasons CSCO offers solid value at just over $17:
- The company has a fortress balance sheet with over $30B in net cash on the books, which represents one third of its market capitalization. The stock also yields 1.9%.
- The stock is cheap at 9 times forward earnings (6 times if you take out cash), a discount to its five year average (13.7).
- The stock is selling at the very bottom of its five year valuation range based on P/E, P/S, P/CF and P/B.
- The 35 analysts that cover the stock have a median price target of $21 on CSCO. The stock has looks like it has bottomed here and just crossed its 50 day moving average (See Chart).
Disclosure: I am long CSCO.