Recurring Product Revenue Could Double For Cisco Systems, Inc. (CSCO), According to Oppenheimer

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Cisco Systems, Inc. (NASDAQ:CSCO) witnessed over doubling of its recurring product revenue since the fiscal year 2008. That will ensure a compounded annual growth rate or CAGR of 19.3% through fiscal year 2020. Those were the comments expressed by Oppenheimer’s analyst, Ittai Kidron. The comments come on the heels of the company losing its premier position in the cloud infrastructure segment to Hewlett-Packard Company (NYSE:HPQ) in the second quarter.

Shift Towards Predictable Model

The brokerage thinks that Cisco Systems, Inc. (NASDAQ:CSCO) has worked towards shifting its business to a more expected model in recent years. That was none other than the target towards software, as well as, subscription-powered recurring revenue streams. The analyst has been bullish on the company’s shares for several years and therefore his opinion would not have come as a surprise to those who are following the company’s stock trend.

Analyst, Ittai Kidron, said that the company’s leasing activity has increased 2.6x after the fiscal year 2008 driven by customer stickiness. He said that more revenue in respect of the recurring streams was locked in the initial quarters. The brokerage believes that the company was on the right path for long-term multiple expansion while it takes time for investors to credit the company.

Service Exposure

Oppenheimer said that Cisco Systems, Inc. (NASDAQ:CSCO) is trying to boost its exposure to services apart from hardware leasing and recurring revenue. That included focus on cloud services. Also, the company wants to achieve it by selling more subscription-based software in SDN, security, Wi-Fi management, and Web conferencing.

The company has always been maintaining a steady growth rate and not an accelerated one. Cisco Systems, Inc. (NASDAQ:CSCO) has also started to sell software bundles through subscriptions program like its ONE licensing program. As a result, the brokerage has reiterated its rating of Outperform on the company’s shares. The analyst also kept a price objective of $32 on the shares of the network equipment maker.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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