JP Morgan’s analyst Samik Chatterjee today downgraded technology company, Cisco Systems to Neutral from a Overweight rating. The analyst cut their target on the stock to $50 from November 11th’s $58 target change, in which the target was cut from $62. Chatterjee’s downgrade was based on “limited investor enthusiasm for the shares” as sentiment has shifted due to the volatility of the current economic climate. JP Morgan believes their are many headwinds such as the “absence of visibility into a return to revenue growth”. He believes the upcoming federal election will hinder IT budgets as customers look to mitigate risks of an increased tax burden coming from Biden’s tax policy.
STA Research(stocktargetadvisor) has a average target of $48, and a consensus Buy rating. STA’s view of the stock is Bullish with a score of 8.2 out of 10, where 0 is very bearish and 10 very bullish
What to like:
High market capitalization
This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.
Superior risk adjusted returns
This stock has performed well, on a risk adjusted basis, compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile.
The stock’s annual returns have been stable and consistent compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile. Although
stability is good, also keep in mind it can limit returns.
Underpriced compared to earnings
The stock is trading low compared to its peers on a price to earning basis and is in the top quartile. It may be underpriced but do check its financial performance to
make sure there is no specific reason.
Superior return on equity
The company management has delivered better return on equity in the most recent 4 quarters then its peers, placing it in the top quartile.
Superior capital utilization
The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.
Superior return on assets
The company management has delivered better return on assets in the most recent 4 quarters than its peers, placing it in the top quartile.
Positive free cash flow
The company had positive total free cash flow in the most recent four quarters.
Underpriced on free cash flow basis
The stock is trading low compared to its peers on a price to free cash flow basis and is in the top quartile. It may be underpriced but do check its financial
performance to make sure there is no specific reason.
What to not like:
Overpriced compared to book value
The stock is trading high compared to its peers median on a price to book value basis.
The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and
management statements. Sometimes this is high because the company is trying to grow aggressively.
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