Opinions
Lorne Zeiler
Cisco
CSCO-Q
COMMENT
Dec 23, 2016
Stock price when the opinion was issued
You might be interested:
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.
A name that he likes. The industry leader. It is huge. Trading at a very reasonable valuation of about 13.5-14 times earnings. Earnings growth has been at the lower end, 2%-5% a year. Roughly 30% of the market cap is sitting in cash. If you X that out, you are looking at a 10X valuation, and he doesn’t think the market has put much on that. If repatriation for US companies happens, you are going to see some dividend increases and increased share buyback.