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CSCO Is Now A $45 By FY17 - Here Is Why !!!

|Includes: Cisco Systems, Inc. (CSCO)

Hi Fellow Investor...

Usually we see heck of analysis and data points and graphs and those commanding comments as they were at the helm of running the business....... today you will see my views why i feel convinced this could be the tech heartthrob in the next two years.

Few Tick marks to CISCO for well execution:

  1. All the downs related to Feds/Govt, Emerging Markets and SP were known to Cisco 5 years back. They prepared them self very well to brace it.
  2. Investments made in various technologies Wireless - Security - UCS - Converged Infra today are billion dollar business
  3. For Cisco the game is over and now they are on the growth trajectory. For competition it has just started.

Below are the four points that highlight about this bullishness:

1) Wireless - Security - UCS- Converged Infra - Datacenter products - ACI in switching - All are billion dollar business today
2) Cloud based - Security - Wireless - WebEx - Cloud Infra - PAAS - IAAS - IntraCloud Infra - All of these are growing and becoming billion dollar business
3) All the features and services today have moved to "Software Licensing" which is a good strategy and also good profits. This will surely make to more than 35% of Company revenue. (though this is not reported separately ).
4) Services revenues have now touched 25% of revenues which was 12% 5 years back and also lot of automation has kicked-in so again a extremely high profitable business.

New areas -

1)IOE - Cisco is bullish here and have been making partnerships with like minded and complementing tech and eco system partners for last 3+ years. Today this is the ONLY Company that can deliver it and has delivered it.

2)CLOUD based initiatives - Big investments are underway and i will leave it here.

3) Software strategy for entire portfolio licensing.

Controls:-

1) In the last 5 years they have brought down the expense and holding it to 2009 levels today.
2) They have cleaned the overlaps in product groups and leadership at all levels.
3) Couching potatoes have been shown the doors.
4) There is NO left-right acquisitions anymore

Now when you compare a peer tech company or a competition they are 5 years behind Cisco and try to copy their patch to come out of this mess.

Emerging market (including China) is a high risk geo for all US companies and you cannot rely on this for large revenues and this has been compensated.

Finally i have seen this company very closely and seen their actions which make me believe to go long, this is a $30 stock by the Feb 2015 earning calls period. - THIS IS DONE

Now why this is a $45 as per what i estimated the future looks like this:

  1. Mr. Chambers will see CSCO at $50B + in revenues convincingly and set directions for $65B+ by FY17 onwards
  2. The outstanding share should be reduced to around 4.5B+ then.
  3. By then IOE will be a $1B will is recognized revenue and shall grow at 200%.
  4. Cloud based offering - subscriptions will be at $2B and growing at 50%
  5. Strategy to move to software licensing will ensure that 35%+ revenues are for selling software and licenses - 90% + margins
  6. Services to be at least 25% of company revenues - As IOE will involve lots of services to CSCO and its partners.
  7. Mr. Chambers succession plan will be in execution by FY16
  8. Dividend will be at a 0.25 / share

Finally why this will be a darling of the street as i see --- I SEE a BONUS on cards by FY16 or FY17.....and this should be the icing on the cake.

Plumbing - a very profitable business and now as the era changes this company changed / navigated and build on these trends - now opportunities which no more impact geo political challenges anymore.

This is not everyone's game...few ONLY play and i reckon Mr. Chambers in the league of extraordinary people.

So be long and accumulate - if last 25% growth on this stock made you happy....Think twice it is just the start. .............Thank you.

Disclosure: The author is long CSCO.