Cisco's stock could surge more than 20% on these three drivers, says BofA

By Emily Bary

BofA upgrades the stock, but it still moves lower in Monday action

A BofA Securities analyst sees three big catalysts ahead for Cisco Systems Inc.'s stock that could drive it more than 20% higher.

BofA's Tal Liani upgraded Cisco shares (CSCO) to buy from neutral on Monday, cheering the company's opportunity to benefit from networking growth on the heels of market-share gains. His $60 target price - up from $55 before - implied above 24% upside from Friday's close.

The company is well positioned to capitalize on the spending rush driven by artificial intelligence, according to Liani, given "the expected migration of AI networks to Ethernet."

"Cisco's alternative silicon offering, and its solid optical portfolio, could create opportunities for greater presence with hyperscalers," he wrote. "We also expect Cisco to address enterprise AI opportunities with a new product based on Nvidia's [graphics processing units], Cisco's servers and switches and Cisco's cloud-based management software."

Read: Don't want to chase Big Tech? Money manager flags three unloved stocks to bet on now.

Beyond AI, he's upbeat about the company's potential in the security market. "We expect security growth to accelerate with the help of firewall stabilization and recent new product launches," Liani wrote.

Security also dovetails with his final expected catalyst, which is the possibility of "great growth synergies" stemming from Cisco's recently closed Splunk deal. Part of that comes on the sales front.

"We believe Splunk could benefit from new go-to-market opportunities through Cisco," Liani said. "Prior to the acquisition, Splunk had a modest channel program, yet management plans to accelerate Splunk's channel growth with Cisco's salesforce of over 20,000 and 60,000 active channel partners, vs. only 2,000 channel partners for Splunk."

Read: Nvidia just keeps getting stronger, and that could be trouble for this stock

Within security specifically, Liani thinks that Splunk synergies can drive a higher growth profile for the segment. Splunk's salesforce has more of a focus on chief information security officers and chief technology offerings, "and management noted it can be an important catalyst for CISO conversations to sell more Cisco security products into," he said.

Cisco's stock was bucking the upgrade in afternoon action Monday, down fractionally alongside declines for all three major indexes.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-15-24 1423ET

Copyright (c) 2024 Dow Jones & Company, Inc.