HSBC Downgrades Cisco and Reduces Target
HSBC downgraded Cisco Systems (NASDAQ: CSCO) to Hold from Buy and cut its price target to $120 from $137 in a research note released on Friday. Analyst Abhishek Shukla commented that the downgrade reflects the stock’s valuation and a lack of near‑term positive catalysts despite solid quarterly performance.
Fourth‑Quarter Performance
Cisco reported fourth‑quarter non‑GAAP operating profit that was 6% above consensus. Non‑GAAP earnings per share were $1.22, representing a 23.2% year‑over‑year increase and 4%‑5% above analyst estimates.
FY2027 Guidance and Outlook
The company guided to fiscal 2027 revenue of $72.8 billion, a 15% increase and above the pre‑results consensus of $68.8 billion. The EPS outlook was set at $5.08, also topping expectations. HSBC raised its fiscal 2027‑28 EPS estimates by 2% to 6%.
Segment and Hyperscaler Expectations
HSBC projects networking revenue to rise 24.2% in fiscal 2027, driven by a 97% growth in the hyperscaler AI subsegment, before moderating to 12% in 2028 and 8% in 2029. Cisco booked $9.3 billion of hyperscaler orders in fiscal 2026, including $4 billion in the fourth quarter, and management expects orders to be “meaningfully higher” in the current year.
EPS Growth Trajectory and Valuation
The bank expects EPS growth to peak at 32% in the first quarter of fiscal 2027 and then ease to around 8% from fiscal 2028 onward. Cisco trades at 20.9× HSBC’s calendar 2027 earnings estimates, compared with a sector median of 21.4×, a discount the bank deems justified given slower long‑term growth relative to peers.
Analyst Commentary
Abhishek Shukla summarized the view as “solid results but missing catalyst,” indicating that the downgrade is primarily driven by valuation concerns and the absence of near‑term growth drivers.