JP Morgan upgrades Cisco, sees negatives for CommScope, Juniper Networks
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Investment firm J.P. Morgan made several changes to networking stocks on Wednesday, upgrading Cisco Systems (NASDAQ:CSCO), while adding CommScope (NASDAQ:COMM) to a negative catalyst watch and removing Juniper Networks (NYSE:JNPR) from its analyst focus list.
Analyst Samik Chatterjee, who moved his rating on Cisco (CSCO) to overweight from neutral, noted the Chuck Robbins-led company is likely to see "limited further downside" in enterprise spending and the stock is "inexpensive" at current levels. 
"We expect the macro to continue to drive spending sluggishness from customers, but at the same time we expect demand/orders for Networking Equipment including Wi-fi, Campus Switching, and Datacenter switching to have limited further deterioration," Chatterjee wrote in an investor note. 
Chatterjee added that the "sluggish" pace of enterprise spending is likely to be offset by the support Cisco (CSCO) has related to its "elevated" backlog and "significant" remaining performance obligations that can still help it reach 2% growth, even if orders decline 10% in fiscal 2024. 
Concerning CommScope (COMM), Chatterjee noted the stock could be negatively impacted by the company's upcoming earnings report, due in part to a pullback in spending from service provider customers, even if shares trade at inexpensive multiples. 
"We place CommScope on the Negative Catalyst Watch into the upcoming earnings print as we expect management to acknowledge the limited improvement in orders driving greater visibility relative to a more modest revenue and EBITDA ramp through the year than required to meet its full-year targets," Chatterjee, who also lowered his price target to $6 from $9, added. 
Chatterjee removed Juniper Networks (JNPR) from the firm's analyst focus list as demand weakness is now in the service provider space and the company has limited abilities to sidestep the slowdown here than in enterprise spending.
"While Juniper is now more diversified relative to the Tier 1 North American Service providers than before, which will limit magnitude of headwinds, we are now cautious relative to limited upside in 2023 despite drawdown of backlog, we continue to remain Overweight rated but remove it as our top pick on the Analyst Focus List," Chatterjee wrote.
Cisco (CSCO) shares rose 2% on back of the upgrade, while CommScope (COMM) and Juniper (JNPR) saw fractional moves.
Analysts are largely bullish on Cisco (CSCO). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates CSCO a HOLD.
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