Shares of Cisco Systems (CSCO) rose about 2% premarket on Monday after Evercore upgraded the stock to Outperform from In Line.
The firm also raised the price target on the stock to $100 from $80.
“While investors will debate if CSCO is cyclical or secular – our sense is there are plenty of tailwinds to ensure CSCO can sustain high single-digit sales and low-teens EPS growth on a multi-year basis, making it an attractive asset at under 20x P/E vs. large-cap tech peers,” said analysts led by Amit Daryanani.
The analysts noted that key points driving their upgrade are: Firstly, Campus Refresh: The analysts said their checks point towards sustained growth in campus markets through 2026 (about 6% to 8% estimated industry growth) driven by customers upgrading to next-generation campus solutions, eight years after the last refresh.
An incremental driver, the analysts added, would be when Cisco begins End of Life, or EOL, andEnd of Services, or EOS, on legacy solutions. There is also robust demand for WiFi 7 that is driving a need for enterprises to shift to higher-bandwidth ports and a need for more Power over Ethernet, or PoE.
Secondly, AI momentum ahead: The analysts said Cisco is on track to deliver AI revenues of about $3.0B in fiscal year 2026 (about 5% of sales) and orders of more than $4.0B (versus $2.0B last year).
Daryanani and his team noted that this is driven by four large hyperscalers, and they see an opportunity to expand this with new products (P200) plus enterprise/sovereign wins.
“Silicon One is ramping as customers look for diversity beyond TH5/TH6 especially given supply concerns. P200 opens up Scale across + Jericho based markets for CSCO that could drive another leg up for orders/revenues as cloud vendors seek vendor diversity across the stack. CSCO optics should also see strong tailwinds (25%+ growth) driven by pluggable (800gb) deployments,” said the analysts.
Thirdly, Telecom plus Core Enterprise: The analysts said that the recovery in traditional enterprise and telco markets is overlooked, and that should provide better diversity of growth as we move forward, especially as enterprises look to get their network AI-ready.
Finally, EBIT margin expansion: “CSCO can sustain ~50-100bps of EBIT margin expansion annually driven by mid/high single digit growth. Risk here is that Security and Collaborationcould underperform vs. target of mid-teens growth; in addition, memory industry dynamics could create some unforeseen challenges,” said Daryanani and his team.