Morgan Stanley has downgraded Cisco Systems Inc. from Overweight to Equalweight, while also lowering its price target from $135 to $120. The firm had previously maintained an Overweight rating since April 2024, citing an attractive valuation and improving networking demand. However, Morgan Stanley now believes that the stock's 43% rise over the past year, outpacing the S&P 500's 14% gain, has eliminated much of the discount it once offered.
The firm acknowledges that Cisco's demand environment and AI opportunities have reinforced its original thesis. Yet, the stock has rerated to parity with the S&P 500 at approximately 19x forward earnings, leaving limited room for further upside. Morgan Stanley cautions that strong expectations and gross margin headwinds from AI-related business could make it difficult for Cisco to exceed full-year expectations ahead of its fiscal first-quarter results.
Despite this downgrade, other analysts remain bullish on Cisco. UBS raised its price target to $138, maintaining a Buy rating, while KeyBanc increased its target to $135. Truist Securities and Rosenblatt also raised their price targets to $140 and $165, respectively, citing strong growth prospects and robust product orders. These updates reflect positive sentiment following Cisco's strong fourth-quarter fiscal 2026 results.