Cisco upgraded to Overweight on networking recovery: JP Morgan

Cisco Systems (NASDAQ:CSCO) was upgraded to Overweight from Neutral by J.P. Morgan due in part to a recovery cycle in enterprise networking.

The investment bank also bumped up the price target on the stock to $66 from $55, an increase of 20%.

Cisco shares have climbed 28% since mid-August. J.P. Morgan believes there is room for further upside in the medium term as Enterprise Networking demand remains in the early stages of a recovery, according to earnings reports from peers.

The industry forecasts 5% growth in WLAN, DC and Campus Switch markets during 2025 following a double-digit decline during calendar year 2024.

“That said, we have been wary of underwriting such a recovery for Networking too early given the experiences relative to the Server and Storage market as well as lackluster Enterprise spending trends overall,” said J.P. Morgan analysts, led by Samik Chatterjee, in a Monday investor note. “However, we have found renewed confidence in recent earnings prints from Juniper Networks (NYSE:JNPR) and Extreme Networks (NASDAQ:EXTR) that the path towards a Networking recovery is underway, with both companies highlighting encouraging signs relative to customer demand and activity.”

Cisco is slated to release its first quarter fiscal 2025 financial results post-market this Wednesday, Nov. 13. A consensus of analysts expects the company to report adjusted earnings per share of $0.87 on revenue of $13.77B.

The “wild card” to watch for in the upcoming earnings report will be the Security segment.

“Given Cisco’s recent re-focus on Security and subsequent investments, Security as a percentage of total revenue has expanded from less than 10% of total product revenue to being on track to account for almost 20% or greater,” Chatterjee noted. “Thus, as we think about the range of outcomes on the successful execution of the strategy going forward to revitalize Security revenue growth and the implications on the aggregate revenue growth, we are becoming more optimistic relative to the end results for Cisco.”

Cisco ticked up 1.5% during pre-market trading on Monday.