Morgan Stanley lowered its rating on shares of Cisco Systems to equal-weight from overweight on Tuesday, citing slowing growth in the company’s networking security business.
“Although Cisco is steadily executing on the Security opportunity we think the current pace is unlikely to offset deceleration in the traditional hardware cycle,” Morgan Stanley analyst James Faucette said in a note to investors. “We therefore think it is a good time to step to the sidelines.”
Faucette explained that his firm originally recommended Cisco as the company had the opportunity to grow meaningfully “as customers implement next generation IT infrastructures,” he said. Cisco’s stock has climbed steadily since October 2011, adding 17 percent over the last 12 months alone.
“But our latest surveys suggest the pipeline for Cisco’s Security sales amongst resellers is flattening,” Faucette said.
Cisco shares slid 0.9 percent in premarket trading from Monday’s close of $47.58 a share. Morgan Stanley has a price target of $49 a share on Cisco.