Cisco in focus as BofA upgrades on back of AI opportunities

Cisco Systems (NASDAQ:CSCO) was in focus on Wednesday as Bank of America upgraded the networking giant, citing coming opportunities in artificial intelligence.

Shares rose 1.6% in premarket trading.

“While AI is currently a small piece of the biz (~2% of revs), we see the potential for a stronger contribution,” analyst Atif Malik wrote in a note to clients. “With more AI coming, we are incrementally more constructive on the group and expect continued investor rotation out of semis/hardware into networking equipment to benefit group valuation.”

Malik upped his rating on Cisco to Buy from Neutral and raised his price target to $62 from $52. In addition to the upgrade, Malik raised his fiscal 2025 and 2026 earnings estimates by 2% and 5%, respectively.

The coming quarterly results — slated to be released on November 13 — could be a “potential catalyst,” Malik posited, as Cisco was added to Meta’s (META) AI hardware portfolio after the Mark Zuckerberg-led company announced its new AI network fabric, Disaggregated Scheduled Fabric.

“We continue to believe META remains a key partner and customer for ANET (~21% of 2023 sales) and view the inclusion of CSCO’s switches in META’s AI hardware portfolio as more of a positive validation of CSCO’s technology than any sign of share loss for ANET,” Malik wrote, referencing Arista Networks (ANET).

A consensus of analysts expect Cisco to earn $0.87 per share on $13.77B for the coming quarter.