CSCO

Cisco to Acquire Cloud Communications Software Firm IMImobile in Nearly $730Mln Deal

Cisco, the world’s leading provider of IP-based networking solutions, announced on Monday to acquire a London-based cloud communications software company IMImobile for 595 pence per share or an aggregate purchase price of nearly $730 million.

Together with IMImobile, Cisco will be able to provide an end-to-end customer interaction management solution, and the ability to drive faster and smarter interactions and orchestration through the customer’s channel of choice, the company said in the statement.

Cisco’s shares closed 0.61% higher at $44.38 on Friday. However, the stock is down around 7% so far this year.

Cisco Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $47.69 with a high forecast of $60.00 and a low forecast of $41.00. The average price target represents a 7.46% increase from the last price of $44.38. From those 16 analysts, eight rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $54 with a high of $65 under a bull-case scenario and $33 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology conglomerate’s stock.

Several other analysts have also upgraded their stock outlook. Cisco Systems had its target price increased by Piper Sandler to $45 from $44. JP Morgan lowered their target price to $46 from $50 and set a neutral rating on the stock. BidaskClub reduced to a strong sell rating from a sell. New Street Research raised to a buy rating from a neutral and set a $60 target price.

Analyst Comments

“Infrastructure revenue likely to decline with a more limited IT budget environment, but pockets of growth can help stabilize earnings. The higher proportion of recurring sales limits downside volatility relative to previous cycles, but still not immune,” said Meta Marshall, equity analyst at Morgan Stanley.

“Security/analytics capabilities should help Cisco stay important to IT budgets even as cloud transition accelerates. Security and applications growth (primarily inorganic) help improve margins of the overall business,” Marshall added.

Upside and Downside Risks

Risks to Upside: 1) Software and services business drive growth. 2) Accelerated replacement cycles from product refreshes support growth in spite of weaker macro conditions. 3) A re-acceleration in GDP and therefore IT spending – highlighted by Morgan Stanley.

Risks to Downside: 1) Federal spending disruption. 2) Prolonged macro downturn and subsequent lack of recovery in networking spend. 3) Security sales materially decelerate given the disruption in leadership.