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In a broad note to investors on Thursday, covering various stocks, JPMorgan analyst Samik Chatterjee downgraded Cisco Systems (NASDAQ:CSCO) from Overweight to Neutral.
The analyst, who lowered the price target on the stock to $51 per share from $62, explained that JPMorgan is taking a defensive stance with its coverage universe as they see “increasing signs of the challenging macro feed into demand trends, and recommend investors look for diversification away from higher risk areas like Enterprise spending as well as Auto exposure relative to more resilient capex spend from Cloud customers as well as Telco/Cable customers.”
“We are cutting estimates across the board with 2H revenue/earnings estimates down -2%/-2% and 2023 revenue/earnings estimates down -3%/-3%, as we mark Enterprise spending to moderate to 3% growth (in line with the long-term average), Auto production growth of flat in 2023, US telco spending down -10%, Cable/broadband capex moderating but resilient, and positive and robust US hyperscale capex,” wrote Chatterjee.
They downgraded Cisco as they “rotate into diversification.”
“Tangible reductions to Enterprise spending have been limited to-date, but there is evidence of hesitation from customers in evaluating spend for the next 12-18 months. Enterprise suppliers can drive revenue upside from backlog drawdown enabled by supply improvement, but we believe the bigger dynamic for Enterprise suppliers will be material order moderation from both tough compares and reevaluation of spending, which in the case of certain companies can drive orders to even decline y/y.”
