Cisco Systems ?accumulate?

09.08.07 - AC Research

NEW YORK, August 9 (newratings.com) ? Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Cisco Systems (CSCO).

According to AC Research?s research note dated August 8 and published this morning, the company has reported its 4Q06/07 earnings results. In that period, Cisco Systems was able to grow sales by 18% to $9.43 billion. Net income rose $0.39 billion to $1.93 billion. Adjusted for special effects, net income amounted to $2.3 billion, or $0.36 per share.

In terms of sales and earnings, the presented results were ahead of the estimates, the analyst says. Here, the company benefited in particular from continuing technology trends, such as online video, VoIP and video conference calls. In all, it appears fair to assume that this development is likely to continue over the next few quarters, the analyst adds.

Against the backdrop of new trends, such as social networks and online videos, Cisco Systems has potential for high growth in the next few years, AC Research believes. The company has raised its long-term forecast for sales growth from 10%-15% to 12%-17%. For the ongoing fiscal year of 2007/2008, Cisco Systems expects 13%-16% sales growth.

Considering the continuing high growth potentials, the company?s stock seems to enjoy a rather moderate rating in view of Tuesday?s closing price of $29.69 and a 2007/2008 P/E ratio of roughly 19. A major risk factor is currently viewed in the possible negative impacts of the US subprime crisis on the IT spending policy of financial services providers, the analyst mentions. Against the backdrop of a very good market position, however, the company is expected to achieve a somewhat better performance than the overall market. On the basis of the company?s current share price, an investment in the stock implies a rather positive chances/risk ratio.

AC Research reiterates its "accumulate" rating on Cisco Systems.