Cisco +6.4% as PT hikes arrive; long-term concerns remain

|About: Cisco Systems, Inc. (CSCO)|By:, SA News Editor

No less than 16 firms have upped their Cisco (CSCO +6.4%) PTs after the company beat depressed FQ4 estimates and offered better-than-expected guidance and order data. The hikes are generally in the $1-$2 range.

RBC (Outperform) thinks value investors might embrace Cisco as it returns to flat revenue growth and further cuts opex. "[Free cash flow] is predictable at $11B-$12B/yr; we look for Cisco to remain a dividend grower." After backing out ~$30B in net cash, Cisco currently goes for ~8x RBC's FCF target range.

Goldman (Buy) estimates Cisco's routing and switching numbers were respectively 8% and 2% above consensus, and is pleased with early uptake for the Nexus 9000/ACI SDN platform and NCS and CRS-X core routers.

Nonetheless, there are still plenty of concerns about long-term challenges. MKM (Neutral), which has already raised alarm bells about SDN threats: "Cisco seems to be benefiting from SDN in the near term, but the competitive landscape is set to become much more difficult over a 12+ month time frame."

Credit Suisse (Underperform) questions "the size and scope" of early Nexus 9000 deployments. "Our secular concern is that the impact of SDN will introduce more competition at multiple points in the network. While the impact will take time, the threat will be very real, shrinking gross profit dollars for the entire networking stack."

Shares are holding onto yesterday's AH gains in spite of a tech selloff.

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