Morgan Stanley downgraded Cisco Systems to Equalweight from Overweight and reduced its price target to $120 from $135, citing valuation concerns after the stock’s substantial rise over the past year.
The firm had maintained an Overweight rating since April 2024, when its investment case pointed to Cisco’s discount to the S&P 500, improving networking demand after an inventory correction, and the possibility of upward earnings estimate revisions. Morgan Stanley said that stronger demand and the emerging opportunity in artificial intelligence have supported that thesis.
Cisco shares gained 43% over the last 12 months, compared with a 14% increase for the S&P 500. The stock now trades at roughly 19 times forward earnings, in line with the index. Morgan Stanley said much of the AI-related revaluation and increase in Cisco’s market value is already reflected in the share price.
The firm expects Cisco could continue to rise as earnings grow, but said elevated expectations and gross-margin pressure from AI business leave less room for further gains. It also sees limited scope for the company to surpass expectations ahead of its fiscal first-quarter results, based on networking and cybersecurity earnings reported so far.
Other analysts have recently raised their Cisco price targets following the company’s fiscal 2026 fourth-quarter results. UBS set a $138 target, KeyBanc $135, Truist Securities $140 and Rosenblatt $165. Their updates cited factors including stronger-than-expected orders, revenue and earnings, as well as Cisco’s position in networking infrastructure and AI-related demand.
Sources: Investing.com News.