Cisco’s stock reached an all-time high Thursday, with expectations for further growth following a strong fiscal third-quarter performance. According to Morgan Stanley, the investment bank has an overweight rating on the tech giant and has revised its price target from $91 to $120, suggesting an 18% upside from the stock’s closing price on Wednesday.
In a note to clients, analyst Meta Marshall expressed confidence in Cisco’s potential, stating, “Multiple relative to other AI capex names still reasonable, growth higher than in 15 years, estimates still likely have room for upside.” This optimistic outlook came after Cisco reported adjusted earnings of $1.06 per share for the quarter ending April 25, surpassing analyst expectations of $1.04. Moreover, the company’s revenue hit $15.84 billion, exceeding the consensus estimate of $15.56 billion.
Looking ahead, Cisco projected adjusted earnings for the fiscal fourth quarter to be between $1.16 and $1.18 per share, once again outpacing the $1.07 estimate from analysts. Despite a forward price-earnings ratio of 23, significantly lower than that of peer Arista Networks at over 37, Morgan Stanley believes Cisco’s valuation could align more closely with forward multiples seen in the AI sector, which are generally above 25.
The investment bank’s new price target of $120 is based on a forward multiple of 25 applied to an earnings estimate of $4.70 per share for 2027. Marshall noted the increasing durability of the AI upgrade cycle, which may bolster Cisco’s growth potential and justify a higher valuation. Currently, Cisco’s performance is tracking slightly above its long-term growth model highlighted during its 2024 analyst day.
Morgan Stanley’s positive projections resonate with broader market sentiments; out of 26 analysts following Cisco, 18 have issued buy or strong buy ratings. This surge in investor confidence has pushed Cisco shares up 52% year-to-date, marking a remarkable recovery and optimistic outlook in the competitive tech landscape.
