Credit Suisse double upgrades Cisco on possible M&A transformation

Cisco Systems' (CSCO) transition towards a diversified IT player can be accelerated in an environment of tax reform, Credit Suisse analyst Kulbinder Garcha tells investors in a research note. He double upgraded Cisco to Outperform from Underperform and upped his price target for the shares to $40 from $27. The stock closed yesterday down 2c to $33.40. Cisco's "major balance sheet could be unleased," allowing it to return an incremental $30B to shareholders over five years, which would leave up to $20B for more transformative acquisitions, Garcha contends. His proprietary M&A analysis yields Splunk (SPLK), ServiceNow (NOW) and Palo Alto Networks (PANW) as the top three takeover targets for Cisco. With deals, Cisco's long term earnings power could be $3.30-$3.50 per share, or over 40% above current levels, the analyst estimates.