Bank of America has picked Cisco Systems as the big buy among tech stocks due to its potentially lower risk in connection to the effects of further escalations in the Sino-U.S. trade war.
The bank highlighted Cisco as being relatively less exposed to China compared to the big five tech stocks collectively termed FAANG.
In a brief to investors, the bank’s Tal Llanl noted that Cisco is an attractive buy when taken in the context of the current market environment.
That analyst pointed out that the FAANG stocks – Facebook, Apple, Amazon, Netflix and Google’s parent company Alphabet, remain among the most affected stocks due to the trade risk. Individually, FAANG stocks have each lost between 4% and 8% in just one week.
Whereas the FAANG companies have an average of about 7.5% of their respective revenue coming from China, Cisco’s only makes up about 3.3%.
According to FactSet, the big five have their average China-influenced revenue generated by two companies with a heavy presence there- iPhone maker Apple and streaming giant Netflix. Per the FactSet figures, these two U.S. tech giants get revenues from China in the range of 18.3% for Apple and 10.3% for Netflix.
Although Cisco shares shed nearly 4% over the past week, it is expected to bounce on the back of a strong earnings report. The company’s shares gained 1.9% on Tuesday as the market looked forward to its third-quarter earnings report released yesterday.
The firm’s quarterly revenue was reportedly above Wall Street forecasts as it recorded growth in its sale of routers and switches. The firm also benefited from its latest focus- cyber security and software development.
Net income climbed to $3.04 billion in Q3 ending April 27, up from $2.69 billion posted a year earlier. Total revenue also increased, from $12.46 billion to $12.96 billion in the same period. It beat analyst estimates of $12.89 billion.
Bank of America is targeting Cisco’s Biedex.com price at $56.