Artificial intelligence is anticipated to be a significant factor enhancing the company’s core performance, according to one researcher’s perspective.
An upgrade in an analyst’s recommendation was responsible for the surge in Cisco Systems’ stock on Wednesday. Investors reacted positively to this new optimistic rating, resulting in a more than 4% increase in the veteran computer networking company’s share price. This performance outpaced the 0.5% rise of the S&P 500 index on the same day.
Before the market opened, Atif Malik from Citigroup upgraded his recommendation for Cisco’s stock from neutral to buy. Along with this upgrade, Malik significantly increased the price target to $62 per share from the prior $52.
Malik identifies great potential for growth in the high-demand area of artificial intelligence (AI), especially since AI currently accounts for only about 2% of Cisco’s total revenue. Given that Cisco specializes in ethernet switches that enable computer networks, the company is well-positioned to gain from the need to connect graphics processing units (GPUs) that support AI functionalities to other hardware.
The analyst also noted that Cisco’s stock valuations are relatively low compared to other companies in the networking segment.
Malik stated, “With more AI coming, we are incrementally more constructive on the group and expect continued investor rotation out of semiconductors/hardware into networking equipment to benefit group valuation.”
Cisco is often perceived as a traditional tech company offering technology that may have been considered more exciting in past years or decades. This has imparted a sleeper quality to the stock, suggesting that Malik may have identified an opportunity.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman holds no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems. The Motley Fool has a disclosure policy.
