Cisco Systems' Stock Climbs Within Range Of a 16-year High After Analyst Upgrade

Shares of Cisco Systems Inc. surged 2.5% in afternoon trade Monday, after Morgan Stanley upgraded the networking giant, citing expectations for an improved replacement cycle in switches and optimism over potential tax policy changes. Analyst James Faucette raised his rating to overweight after being at equal weight since August 2015. He boosted his stock price target to $39, which is 14% above current levels, from $32. "The paradigm shift to security-defined networks...presents an investment opportunity in Cisco," Faucette wrote in a note to clients. "We continue to see evidence in our channel checks and surveys that security sales are beginning to pull through network equipment upgrades, which we think will improve replacement cycle metrics." He said tax policy changes that incentivize foreign cash repatriation, as President Donald Trump has promised, can lead to share repurchases that reduce shares outstanding by 10% to 15%, which in turn would boost fiscal 2018 EPS by 10% to 20%. The stock has rallied to within 0.5% of the 16-year closing high $34.44 reached on May 3. It has run up 13% year to date, while the Dow Jones Industrial Average has gained 6.1%.