CSCO Stock Clocks Best Week In Nearly 25 Years; HSBC Sees 19% Upside

• HSBC  upgraded CSCO to ‘buy’ from ‘hold.’
• CSCO price target hiked to $137 from $77.  
• Shares jumped nearly 23% this week, its best since October 2001.

Cisco (CSCO) share price jumped 2% on Friday and recorded its best week since 2001 as investors continued to cheer the networking hardware maker’s stellar quarterly earnings performance, which blasted past expectations. 

Cisco stated that its record third-quarter (Q3) performance was driven by a strong, broad-based demand for its products. CEO Chuck Robbins stated that the company’s performance during the quarter demonstrated its relevance in connecting with and securing AI technology. 

HSBC upgraded the software name to ‘buy’ from ‘hold’. It also hiked its price target on shares to $137 from $77, implying nearly 19% upside from Thursday’s close. 

“Looking ahead, the biggest growth drivers for Cisco will likely be hyperscaler AI build-outs and enterprise artificial intelligence networking upgrades, in addition to campus modernization as requirements for traffic, security, and latency increase, according to HSBC.

“Despite gross margin pressure, management has credible offsets through pricing, tighter contract terms, supply chain commitments, [operational expenditure] discipline, and lower memory utilization within designs,” analyst Stephen Bersey said in a note to clients, accessed by CNBC. 

CSCO Q3 Performance 

CSCO’s revenue increased 12% in the quarter ended April 25 to $15.8 billion from $14.15 billion a year earlier, beating expectations of $15.6 billion. Net income rose to $1.06 per share, above the $1.04 expected, according to data from Fiscal.ai. 

The networking hardware firm expects revenue for the quarter ending July to be $16.7 billion to $16.9 billion, above market expectations of $15.8 billion, according to Fiscal.ai. Excluding some items, earnings will be roughly $1.16 to $1.18 a share. Analysts expect a profit of $1.07 a share.

“Networking is a critical enabler of, and bottleneck to, AI model performance. This leads to high spending on AI network infrastructure that supports growth for Cisco and its peers. We expect this trend to continue powerfully over the next five years,” a recent Morningstar Report said. 

CSCO CEO Commentary

CEO Chuck Robbins, during an interview with CNBC on Thursday, said that Cisco’s silicon strategy has allowed it to control more of its destiny and supply chain.

He added that Cisco has already achieved its $5 billion hyperscaler revenue target for the year, with one more fiscal quarter still to go. The company has raised its hyperscaler revenue forecast to $9 billion, and Robbins added that it must bring in an additional $3.7 billion in revenue in the fourth quarter (Q4).

“It feels like there is a bit of a networking supercycle we’re entering right now. I remember sitting in a board room… seven or eight years ago, when someone said, ‘Are we sure companies are going to continue to buy Ethernet switchboards?’ I think we’ve proven that that’s definitely the case,” Robbins said.

CSCO Retail and Analyst View 

Retail sentiment on Stocktwits was “extremely bullish” with “extremely high” message volumes. 

One user highlighted that investing in Cisco goes beyond the simple earnings trade. 

The stock has gained 41% year-to-date. 

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