Raymond James analysts downgraded Cisco Systems (NASDAQ:CSCO) shares to Market Perform from Outperform with a price target of $65 per share.

The analysts anticipate that Cisco will experience a decline in campus sales, which are likely responsible for approximately one-third of the sales decline expected in CY24.

Moreover, the pending $28 billion acquisition of Splunk (NASDAQ:SPLK), while strategically sound as it complements XDR, limits Cisco’s options and lacks differentiation in the face of mounting competitive pressures, such as Crowdstrike’s (NASDAQ:CRWD) Falcon LogScale and Palo Alto’s (NASDAQ:PANW) Cortex XSIAM.

Despite these challenges, the analysts argue that the valuation remains attractive, with a forward price-to-earnings (PE) ratio lower than the S&P 500 and an enterprise value-to-earnings before EV/EBITDA ratio below the 5-year median.

Furthermore, preliminary checks suggest that at least the October quarter will meet expectations, although there is some risk to the outlook.

“We expect Cisco does well in its October quarter. Cisco’s backlog has come down. We imagine Cisco could forecast a worse than seasonal sales decline in its January quarter while customers absorb prior purchases and the macro remains weak,” the analysts said.

“Hyper-scale operators remain a bright spot, but at ~6% of sales does not turn the tide. The Security segment also sounds improved.”