BofA Sees Room for Upside in Cisco Stock Despite Recent Sell-Off

Cisco Systems reported record quarterly revenue and stronger-than-expected earnings in its fiscal fourth-quarter report. The stock still fell sharply after the report, but Bank of America analyst Tal Liani sees an opportunity in this disconnect.

Liani reiterated a Buy rating on Cisco and raised his price target to $150, arguing that broad networking demand and growing AI revenue could leave room for further upside. This implies roughly 33% upside from Cisco's Aug. 18 closing price of $112.90.

Cisco's networking business is gaining momentum, with revenue jumping 28% to $9.8 billion in the fourth quarter. Orders were even stronger, rising 35%, while networking orders climbed 40%. The company expects this strength to carry into the new fiscal year, guiding for first-quarter revenue of $18 billion to $18.2 billion and adjusted earnings of $1.32 to $1.34 per share.

BofA believes that Cisco's AI target could be conservative, with the company generated about $4 billion in AI infrastructure revenue during fiscal 2026 and expecting this figure to reach $7.5 billion in fiscal 2027. The bank expects stronger networking revenue as recent orders convert into sales and sees fiscal 2027 AI orders materially exceeding the $9 billion level reached this year.

However, Cisco still has a margin problem to watch, with its adjusted gross margin slipping to 66.3% in the fourth quarter from 68.4% a year earlier. BofA expects gross margin to fall to roughly 64.5% in fiscal 2027, about 150 basis points below the Street's outlook.