Wells Fargo upgrades this tech stock after an earnings beat, sees strong AI momentum

CNBC

15-05-2025

Emerging artificial intelligence opportunities could push Cisco higher, according to Wells Fargo. Analyst Aaron Rakers upgraded the technology stock to overweight from equal weight. He also lifted his his price target to $75 from $72, signaling 22% upside. Rakers pointed to accelerating AI momentum and diversification for the company as one driver for his rating change. Exiting its fiscal third quarter, Cisco already managed to surpass its $1 billion cumulative order target for the fiscal year. With this, the company could continue to diversify into other AI opportunities, such as large-scale sovereign AI opportunities and long-term traditional enterprise adoption. "We also see Cisco as well-positioned for longer-term enterprise AI (hundreds of millions); NVIDIA alignment a differentiator," he wrote. "With this, we think investor sentiment will become increasingly positive on Cisco's internal Silicon One competitive positioning." Cisco's orders have also grown at a solid pace this year. Rakers believes that the company could return to a higher valuation once investors completely factor in this AI traction plus increasing confidence in returning to sustained growth. "With increasing confidence in a normalizing order growth recovery, we see Cisco as presenting a continued EPS upside + value rerate story," the analyst wrote. Rakers also highlighted its mature subscriptions base, now estimated at 56% of Cisco's total revenue and more than 40% of its total product revenue. He added that Cisco also has the ability "capitalize on a broadening enterprise campus/branch networking upgrade cycle." The upgrade comes after Cisco report fiscal third-quarter results that beat analyst expectations, sending shares higher by 4%. Year to date, the stock has climbed more than 3%. CSCO YTD mountain CSCO year to date Analysts are somewhat split on the stock. Of the 24 who cover Cisco, 13 rate it a buy or strong buy, according to LSEG. Another 11 have a hold rating on shares.