Deutsche Bank advised to buy Cisco shares: the company has caught a tailwind from AI

The analyst of Deutsche Bank improved the rating of shares of the world's largest supplier of network equipment Cisco Systems from «hold» to «buy» and expects their growth by 14%. The investment bank believes that investors have so far underestimated the effect of the AI-boom on the company's income: it is thanks to this «tailwind» that Cisco's revenue and profit will show steady growth. Last month, a Wells Fargo analyst expressed a similar opinion.

Deutsche Bank analyst Matt Nicknam upgraded Cisco from Hold to Buy and raised his target price from $65 to $73 per share, CNBC reports. The new target implies the potential for growth of quotations by another 14% on the horizon of the next 12 months.

By words analyst, the company has caught a tailwind in AI infrastructure, and it will drive its revenue growth of 5-6% in the coming years. Nicknam also noted that Cisco is benefiting from an improved competitive landscape in the networking market and is scaling up in the cybersecurity segment, which strengthens its position in both areas.

The investment bank analyst also praised the company for its ability to effectively manage its supply chain and generate revenue at high margins. This, he said, helps it better deal with trade restrictions like Trump's duties and channel funds for growth. Plus, Cisco has been consistently generating free cash flow, which creates opportunities to grow shareholder returns through buybacks and dividend increases, Nicknam added.

Overall, Deutsche Bank believes that Cisco is on a strong growth trajectory, backed by a strong financial strategy. At the same time, the company's securities are trading at an «unconstrained» valuation: about 25% cheaper than the average of the S&P 500 index members, Niknam emphasized. «We see increasingly clear prospects for sustainable earnings growth of 7-9% per year, which we believe should help narrow the discount to the market multiple,» the Deutsche Bank analyst gave an outlook.

At the end of trading on June 16, shares of Cisco rose by more than 2% to $65.5. Since the beginning of 2025, the company's quotations have grown by about 11%, while the main U.S. stock index S&P 500 has added about 2.5%.

Last month, the companyreceived another similar upgrade to «buy» - from Wells Fargo analyst Aaron Rakers. He also raised his target price from $72 to $75 - 14.5% above Monday's close. Rakers became more positive on Cisco's outlook after reporting third-quarter fiscal 2025 earnings for the fiscal year ended April 26. Revenue and adjusted EPS came in better than Wall Street expectations, and the value of AI infrastructure orders from Internet companies for the three quarters topped $1.25 billion. Cisco didn't expect to see that result until the end of the current quarter. The outperformance was precisely one of the reasons for the upgrade. According to the analyst, this indicates a growing demand for the company's corporate solutions related to the deployment of AI systems. And high demand, in its turn, opens up opportunities for expanding the company's participation in large-scale government projects related to the construction of data centers for government AI, as well as for concluding long-term corporate contracts;

The Wells Fargo analyst, like his Deutsche Bank colleague, believes the market has so far underestimated the effect of AI in Cisco's business. «Cisco is well positioned for long-term expansion in enterprise AI (hundreds of millions of dollars). The partnership with Nvidia is an important competitive advantage,» Rakers noted. - We see potential for Cisco to continue to grow earnings per share and revise multiples following a recovery in order growth.»

Now the majority of Wall Street analysts - 14 out of 25 - recommend investors buy Cisco stock (Buy and Overweight ratings). The rest are neutral with a Hold rating. The consensus target price is $71.5 - up 9% from the close on June 16.