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Cisco (NASDAQ:CSCO) was downgraded at Raymond James with sales set to decline.
The bank dropped its rating on Cisco (CSCO) to Market Perform from Outperform following a reassessment of estimates, expectations and trends.
Shares are little changed premarket on Monday morning.
“We believe declining campus sales, which likely amount to about a third of sales decline in CY24 and contribute to an overall sales decline,” analysts led by Simon Leopold wrote in a note.
“The pending $28B Splunk acquisition makes strategic sense (complements XDR), but reduces options for Cisco and lacks differentiation as competitive pressures mount.”
The stock’s valuation remains attractive with a forward PE ratio below the S&P 500’s, and while the October quarter should at least meet expectations, the future is uncertain.
Cisco could also forecast a worse than seasonal sales decline in its January quarter while customers absorb prior purchases and the macro remains weak.
Last month, Cisco (CSCO) said it agreed to a deal to acquire cybersecurity company Splunk (SPLK) for $28B in an effort to make companies “more secure and resilient” as artificial intelligence further creeps into everyday life.
“Although the acquisition makes strategic sense, the employment of $28B caps Cisco’s ability to make other deals, raise its dividend or buy other companies,” the analysts said.
The stock has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Seeking Alpha’s quant system, which consistently beats the market, rates the stock a HOLD.
