Opinions
Darren Sissons
Cisco
CSCO-Q
DON'T BUY
Apr 24, 2013
Stock price when the opinion was issued
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Splunk acquisition in cybersecurity segment has secured a lot more recurring revenue for the company. Steady eddy. Keeps making good acquisitions and integrating. Good management, balance sheet, and dividend yield.
Not cheap anymore, so he sold on the valuation call. Nothing wrong with the business per se if you have a very long horizon.
King of the networking stocks. Hit their stride, mainly because of NVDA selling out of Blackwell and H20 and so on. Started beating on top and bottom, raising guidance (even during the tariff time). Pretty fully priced, with a $70.75 price target within 12 months.
Another play in Edge AI. Kinetic for Cities is Edge AI that you can put on sensors around a city for water, traffic, air, everything. Poster child for this application is Singapore. King of routers and switches, but Edge AI will be very intriguing for them. His 12-month price target is $75.50. Yield is 2.44%.
(Analysts’ price target is $71.54)Historically, is a good allocator of capital (dividends, buybacks), but lacks growth. They partly returned to growth on the $30 billion purchase of Splunk to drive their cybersecurity business. In turn, this drives earnings and margins. Are a free cash flow machine.
Was a real darling until the 2000 timeframe and then the networking market fell on its back and has gotten tougher and tougher. From a macro point the increasing penetration of smart phones is going to lead to higher and higher levels of network requirements, more fibre and we are starting to see companies that are in those areas start to move. Unfortunately this company’s big competitor is Quaway (?) out of China where they want to get more Chinese exposure. Getting slow growth out of Europe because of the recession. Because they are a global player, they are dealing with the US government. Near-term growth outlook is challenging. Dividend and balance sheet are very attractive but we need to see it at a lower level.