Cisco (NASDAQ:CSCO) was the topic of conversation of Stern Agee analyst Shaw Wu, who recommends acquiring the stock at this time before they fix most things the company.
Even trading where it is now, below $17 a share, Wu sees the company as a $27 to $28 per share company.
He reiterated a "Buy" rating on the stock today, with a price target of $29 on it.
Here's Wu's breakdown of the Cisco share price:
The router business at the same 20 times P/E as Juniper Networks (NASDAQ:JNPR), citing Cisco’s “high barriers to entry” and high profitability in that segment. That would equal 20 times 36 cents a share for this year, or $7 a Cisco share.
Switches should be valued at an 11 times P/E, below Netgear’s (NASDAQ:NTGR) 14 times P/E. That would be about 11 times 63 cents, or $7 a Cisco share.
New products are collectively valued at $5, using a 12 times multiple of the 45 cents those products generate in EPS, which is “conservative” according to Wu, relative to the multiples of some younger networking companies, such as F5 Networks (NASDAQ:FFIV), which has a 23 times multiple.
The Cisco services segment is valued $4 a share, a multiple of 10 times, below IBM’s (NYSE:IBM) 12 times P/E.
Add to that the $4 a share for Cisco’s cash after taxes, and you reach the $27 Wu sees.
Cisco was trading at $16.67, up $0.02, or 0.12 percent, as of 1:55 PM EDT.
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