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Cisco Systems, Inc. Price Target Raised Ahead Of Earnings

Cisco Systems is scheduled to release its next earnings report on May 13, and on average, analysts are looking for revenue of $12.07 billion and earnings of 53 cents per share. As most aging technology companies are right now, Cisco is also facing some transitions as the PC market starts to show its age.

Cisco Systems, Inc. Price Target Raised Ahead Of Earnings

RJ ups Cisco’s price target

In a report dated May 11, Raymond James analysts Simon Leopold and Victor Chiu said they have bumped up their price target for the networking equipment provider from $30 to $33 per share. They have also maintained their Outperform rating on the company’s stock.

The Raymond James team has an estimate of $12.03 billion in revenue and earnings of 52 cents per share for Cisco Systems’ third fiscal quarter of 2015. Management guided for revenue of between $11.89 billion and $12.12 billion for the quarter. For the fourth fiscal quarter, the analysts are expecting management to guide for between 1% and 4% sales growth year over year.

Multiple transitions at Cisco Systems

As is usually the case, the analysts’ checks during the quarter indicated conflicting data points for Cisco. Continuing macro problems like currency headwinds continue to create risk for System. However, they continue to expect long term earnings growth, product cycles and a continuing shift to “a software centric world.”

They point out that Cisco is part of an industry that’s in transition, and they think the company will be successful in evolving along with the industry. They expect the company to be able to successfully adjust its business to “more software centric networks.” Difficult sales growth is to be expected because of the ongoing transition, but the Raymond James team remains bullish on Cisco’s margins and growth in earnings per share.

Another big transition the company is going through right now is the shift to a new CEO. Chuck Robbins, who is relatively unknown on Wall Street, will be taking the helm. Leopold and Chiu said they were “both surprised and embarrassed” about the regime change but seem overall pleased with the selection, as employees at the networking company seemed to receive him well.

Cisco’s multiple to expand

The reason they upped their price target for Cisco is because they believe the company’s multiple should expand considering its peers and execution of the transitions going on right now. They also think investors “hold a generally favorable view” of the company, particularly non-tech investors.

They think investors are looking for “the next ‘Microsoft,'” noting that Microsoft’s forward earnings per share multiple has expanded from about 10 times to over 15 times over the last several quarters. Their new price target for Cisco represents a multiple of 14 times.

The Raymond James team adds that Cisco certainly isn’t Microsoft, but both companies are in the midst of several transitions.

As of this writing, shares of Cisco Systems were up 0.14% to $29.26 per share.