Bank of America analyst Atif Malik has upgraded Cisco Systems (CSCO, Financial) from a "neutral" to a "buy" rating, increasing the stock's price target from $52 to $62. This optimistic outlook is driven by the potential opportunities in the artificial intelligence (AI) sector. Although AI currently represents only 2% of Cisco's revenue, Malik believes it could significantly contribute to the company's future growth.
As AI technology advances, Malik expects that investor interest will lean more towards networking equipment stocks, positively influencing Cisco's valuation. At the time of reporting, Cisco shares had risen by 1.8% in pre-market trading.
Furthermore, Malik has raised Cisco's earnings forecasts for fiscal years 2025 and 2026 by 2% and 5%, respectively. He anticipates that Cisco's upcoming quarterly results, scheduled for release on November 13, could serve as a "potential catalyst" for the stock price, especially given Cisco's recent inclusion in Meta's (META) AI hardware portfolio.
While there may be concerns about the impact on Arista Networks' (ANET) market share, Malik views this as a testament to the strength of Cisco's technology.
Analyst consensus forecasts for Cisco's next quarter estimate earnings per share to be $0.87 with revenue reaching $13.77 billion.
