#JPMorgan adjusted its stance on #CiscoSystems (NASDAQ:#CSCO), resuming the stock with a Neutral rating from Overweight and setting a new price target of $53, a decrease from the previous #target of $62. The firm has reinstated coverage of #Cisco with this new rating after a period during which it did not have a rating for the company.

The downgrade reflects a cautious view of Cisco’s medium-term prospects #despite a favorable near-term setup. #JPMorgan notes that while there are moderating headwinds in the #Networking #market and Cisco’s valuation is relatively discounted, the expected earnings per share (EPS) compound annual growth rate (CAGR) of over 5% for the fiscal years 2024 to 2027 is considered muted.

Cisco’s Campus Networking segment, which includes Switches and Wireless LAN (WLAN), is still recovering from a surge in demand post-pandemic. Although the incremental challenges in this area are lessening, JPMorgan anticipates a slower-than-average recovery before normal replacement cycles resume.

The firm also mentions that Cisco’s recent Campus Switch updates, particularly the CAT 9K family, have covered a significant portion of the installed base, implying limited potential for product cycle-related gains even as the broader market recovers.

Furthermore, JPMorgan projects that the integration of Splunk, a company that provides insights from machine-generated data, will positively contribute to Cisco’s revenue growth by approximately 100 basis points (bps). This is expected to enhance Cisco’s core revenue growth estimate from 2.5% to a total of 3.5%.

Despite these positive factors, the anticipated EPS CAGR of over 5% for FY24-FY27, including the impact of Splunk’s consolidation in FY25, leads JPMorgan to maintain a conservative outlook. Given the moderate changes in the medium-term EPS forecast, the firm suggests that Cisco’s shares should trade near their historical average multiple.

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