Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.
Cisco (CSCO). It is pretty hard to find much wrong with Cisco. The only thing that may cap its shares in 2007 is the 50% run-up the stock had in 2006. As telecommunications companies upgrade their infrastructure no company will benefit more that CSCO and, with its purchase of Scienfic Atlanta, it offer products that extend all the way to the consumer’s living room. The rise of video and VoIP applications should drive strong demand for the company’s next generation routers and switches.
Cisco’s position in its key markets is being bolstered by management’s decision to invest in new technology and markets instead of trying to squeeze every ounce of profit out of the company near-term. The company is making a concerted push into emerging markets like India.
Cisco seems to buy a company a month to increase it foot print in markets including. security, storage, wireless networking, Internet-based telephony (or VoIP), and video. The company has over $16 billion in cash so it can readily move into new markets using its current war chest.
Factors that could move the shares above forecast: Growth in video, VoIP, and data to the home could grow faster than expected as satellite, telecom and cable companies try to beat one another to the punch in offering new services to consumers.
Factors that could move the stock price below forecast: Everyone would like a piece of Cisco’s growing business. Ericsson recently bought Redback Networks to get into the router business. If any of Cisco’s competitors succeed in getting even a modest gain in share, it could hurt the stock price.
Douglas A. McIntyre can be reached at firstname.lastname@example.org. He does not own securities in companies that he writes about.