Cisco, Arista Cut to Neutral On Concern About Network Demand

Cisco Systems  (CSCO) – Get Report and Arista Networks  (ANET) – Get Report were downgraded by Citigroup analyst Jim Suva, who sees the coronavirus pandemic continuing to blunt corporate demand for networks.

Cisco has networking systems for internet communications and internet technology, and Arista has cloud networking solutions.

Suva cut his share-price targets to $43 from $48 for Cisco and to $230 from $290 for Arista. 

Cisco, San Jose, Calif., recently traded at $40.31, up 1.2%. The stock has slumped 16% year to date. 

Arista recently traded at $226.29, down 0.6%. The stock has gained 11% year to date. The S&P 500 has climbed 10% year to date

“It is clear to us that business and life will not return to the pre covid-19 normal,” Suva wrote in a commentary.

“While we recognize there is likely a permanent shift to a more flexible work environment, we have found most companies have figured out how to fully support all employees working from home, all employees returning to the office, and any combination of home versus work location. This has led to additional cloud and white box adoption and less … demand for enterprise equipment.”

Morningstar analyst Mark Cash is a bit more optimistic. Though Cisco has issues now, the future looks brighter, he said in an Aug. 12 commentary.

“While we expect demand weakness to continue impacting Cisco in the near term, the company’s product portfolio strategy, solid operating profile, and balance sheet give us confidence in the longer term. We are maintaining our $48 fair value estimate,” Cash wrote.

“Cisco continues to push toward more recurring revenue,” he noted.