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Cisco Stock Surges: Morgan Stanley Sees 18% Upside Potential

Cisco shares surged to record highs after the company announced better-than-expected financial results for its fiscal third quarter. Key figures included $1.06 EPS and $15.84 billion in revenue, surpassing analyst forecasts. In response, Morgan Stanley raised its price target from $91 to $120, implying an 18% potential upside while maintaining an 'overweight' rating. The investment bank cited the durable AI upgrade cycle as a key support for the stock's valuation. Furthermore, 18 out of 26 covering analysts currently recommend buying the stock, contributing to the stock's 52% year-to-date gain.

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Cisco Stock Surges: Morgan Stanley Sees 18% Upside Potential

Cisco shares surged to a record high Thursday following the company's blowout fiscal third-quarter results, prompting Morgan Stanley to raise its price target and maintain a positive outlook.

Strong Quarterly Earnings Drive Stock Surge

Cisco reported financial results for the quarter ending April 25, significantly exceeding market expectations. The strong performance fueled a substantial rally in the stock price.

Key financial highlights included:

  • Earnings Per Share (EPS): Cisco reported $1.06 per share (adjusted), surpassing the $1.04 expected by analysts polled by LSEG.
  • Revenue: Total revenue reached $15.84 billion, beating the consensus estimate of $15.56 billion.
  • Future Guidance: The company projected adjusted earnings for the fiscal fourth quarter to be in the range of $1.16 to $1.18 per share, exceeding the $1.07 estimate.

Morgan Stanley Raises Price Target and Maintains 'Overweight' Rating

Following the positive report, Morgan Stanley reiterated an 'overweight' rating on Cisco and increased its price target significantly.

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  • Price Target Increase: The bank raised its price target from $91 to $120.
  • Implied Upside: This adjustment suggests a potential upside of 18% from the previous closing price.
  • Analyst View: Analyst Meta Marshall noted that the relative valuation compared to other AI capital expenditure names remains reasonable, citing growth potential exceeding the last 15 years.

Valuation Comparison and AI Outlook

Morgan Stanley's analysis placed Cisco's valuation in context with major tech peers, emphasizing the durability of the AI upgrade cycle.

  • Valuation Metric: The $120 price target reflects a valuation based on expected 2027 earnings of approximately $4.70 per share.
  • Peer Comparison (P/E Multiples): For context, other major tech companies trade at the following Price-to-Earnings (P/E) multiples:
    • Nvidia: 25.3
    • Oracle: 23.5
    • Microsoft: 21.1
    • Alphabet: 28.2
    • Amazon: 29.4

Marshall added that the sustained AI upgrade cycle provides support for a higher valuation, noting that Cisco is now tracking modestly above its long-term growth model established during its 2024 analyst day.

Analyst Consensus

Overall sentiment among industry analysts remains bullish. Out of the 26 analysts covering Cisco, 18 have issued a 'buy' or 'strong buy' rating. Year-to-date, the stock has seen a substantial increase of 52%.

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