Wall Street's in love with Cisco again
SAN FRANCISCO (MarketWatch) -- Wall Street is in love, again, with
The blue-chip stock has jumped 15 % in the last two weeks, and it lately traded up 3.2% to close at $17.70 in Thursday dealings after the San Jose-based tech bellwether (CSCO) scoring upgrades from Goldman Sachs and Piper Jaffray.
Cisco's stock has risen more than 10% just this month, the best among the 30 components of the Dow Jones Industrial Average (DJIA) , and has posted the biggest month-to-date gain among large-cap firms in the S&P 500 index (SPX) . The stock is on track to end the week with a gain of more than 7%.
So why, considering that Cisco remains vulnerable to global economic uncertainty, are investors more upbeat about the networking giant?
The tech powerhouse is considered well-positioned to cash in on strengthening demand for networking gear fueled by rapid growth in rapid Internet traffic as well as the shift to cloud computing.
Analysts also point to signs of a rebound in demand in telecommunications gear in the second half of the year, after a period of slower growth.
Such an expected business uptick has also lifted shares of rival
A major factor behind Cisco's gains is the company's recent restructuring aimed at reducing costs and maintaining a leaner and more focused organization -- an effort that analysts say is clearly paying off.
"Cisco was one of the first to call the darkening macro environment," Caris & Co. analyst John Slack said in a note to clients.
But a combination of "solid execution and conservatism should allow the shares to recover with service provider and IT spending in the back half of the year," he added.
"In key areas where Cisco has control over its own destiny our checks indicate the company continues to execute well despite the difficult environment," Slack wrote.
At Piper Jaffray, analyst Troy Jensen raised Cisco's rating to overweight from neutral with a $22 price target, saying channel checks indicate that the company will meet or even slightly exceed revenue expectations when it reports financial results for the fourth quarter of fiscal 2012. The results are due out Aug. 15 after the close of U.S. trading, Cisco said.
"Tight cost controls should drive better-than-expected earnings-per-share results," Jensen wrote. "We believe Cisco's fundamentals are inflecting positively."
Meanwhile, Goldman Sachs analyst Simona Jankowski added Cisco to the broker's conviction buy list with price target of $24 -- implying potential upside of about 40% from Thursday's closing price.
"We believe its fundamentals are inflecting positively, with both our recent IT survey and our just-published channel survey pointing to stronger-than-expected growth in enterprise networking, and switching in particular, as well as to a stronger competitive position for Cisco," Jankowski wrote.