Legacy tech giant Cisco Systems Inc. (CSCO), despite dropping nearly 20% over the past three months, could see its stock skyrocket by 70% to reach $80 per share, back to the high it reached during the bubble era in 2000, according to Evercore ISI analyst Amit Daryanani, as outlined by Barron’s. That could add $140 billion to the company's market value, which today stands at just under $200 billion.

Daryanani wrote a recent note highlighting several “upside levers” that should drive the networking company’s shares to outperform. “We think CSCO remains an attractive asset to own given the company’s positioning in a growing and profitable product market, increasing software/services mix, M&A tailwind, and a favorable shareholder return profile,” wrote the analyst. 

Cisco Shifts Focus

Daryanani is upbeat about Cisco’s shift away from hardware to a software-driven model and its focus on new high-growth sectors of the market such as cybersecurity and applications. As for Cisco’s core networking segment, the Evercore analyst is forecasting growth in the low- to mid-single digits on a percentage basis.

“The stock should be positioned for continued expansion particularly as the mix of recurring revenue increases and [free cash flow] remains robust,” he said. While his base case scenario is for a $60 price target, Daryanani says there is long-term upside potential for more than $80 per share on a multiyear basis. 

Daryanani is optimistic about investors’ willingness to value the stock on an enterprise value/free cash flow basis as Cisco continues with its restructuring towards higher growth, higher margin businesses. “If we assume Cisco stock can trade toward a 20x EV/FCF [enterprise value/free cash flow] we see a path to $80 longer term,” he added. 

Piper Jaffray analyst James Fish echoed that sentiment, writing that his infrastructure calculation for Cisco implies a higher valuation for the stock, per another Barron's report. He is also expecting some “elephant-sized deals” for Cisco moving forward, looking at targets such as Splunk Inc. (SPLK), ServiceNow Inc. (NOW) and Akamai Inc. (AKAM). 

What’s Next 

To be sure, headwinds still present a risk to Cisco’s stock. In particular, the looming threat of trade wars could weigh on the tech titan’s share price and market value. In August, Cisco’s disappointing revenue forecast for the third quarter of flat to 2% growth was attributed to a “precipitous drop” in its China business, per the Wall Street Journal.