: Cisco stock approaches post-2000 highs after earnings show return to revenue growth

Cisco Systems Inc. shares rallied to price levels the company hasn’t seen since the dot-com bust Wednesday in extended trading after the networking giant’s earnings and outlook topped Wall Street estimates and showed revenue growth for the first time in more than a year and a half.

Cisco CSCO, +2.09%  shares surged 6% to $44.61 after hours on heavy volume, which would be the highest close for the stock since Dec. 15, 2000, when shares closed at $48.17, according to FactSet data.

The company reported a fiscal second-quarter loss of $8.78 billion, or $1.78 a share, compared with net income of $2.35 billion, or 47 cents a share, in the year-ago period. Adjusted earnings, excluding $11.1 billion in charges from the U.S. tax overhaul, were 63 cents a share. Of the 26 analysts surveyed by FactSet, Cisco on average was expected to post adjusted earnings of 59 cents a share; the company had forecast 58 cents to 60 cents a share.

Read: Tax overhaul is a credit negative for tech sector, S&P says

Revenue rose to $11.89 billion from $11.58 billion in the year-ago period, breaking a streak of six straight quarters of year-over-year revenue declines. Wall Street had expected revenue of $11.81 billion, according to 23 analysts polled by FactSet. Cisco had predicted revenue of $11.7 billion to $11.93 billion.

“This was another step forward for [Chief Executive Chuck] Robbins & Co. as Cisco looks to slowly be getting back on the modest growth trajectory with a software centric approach the key DNA in its turnaround plan,” said Daniel Ives, GBH Insights analyst, in a note. Ives has an “attractive” rating on the stock and a $45 price target.

Services revenue rose 3% to $3.18 billion, while analysts had expected a 0.9% rise to $3.13 billion. Security revenue, on the other hand, rose 6% to $558 million, while Wall Street had expected a 10% gain to $582.8 million.

“Both applications and security were up 6%, and that’s very positive given the investments the company has been making,” said Patrick Moorhead of Moor Insights & Strategy, in a note. “While the company has more to show quarter after, it appears the turnaround is happening and Cisco CEO Chuck Robbins and team deserve a lot of credit.”

For the fiscal third quarter, Cisco estimates earnings of 64 cents to 66 cents a share on revenue of $12.3 billion to $12.54 billion. Analysts expected earnings of 63 cents a share on revenue of $12.13 billion.

Separately, Cisco announced a 14% hike to its quarterly dividend to 33 cents a share, and an authorization to buy back an additional $25 billion in shares, raising its total repurchase authorization to $31 billion.

Expect analysts to hike their price targets on Thursday. Of the 29 analysts who cover Cisco, 20 have buy or overweight ratings, and nine have hold ratings. Before the release of earnings, those analysts had an average price target of $42.69, or 1.4% higher than Wednesday’s close.

Cisco stock had gained 30.3% in the past year before any post-earnings bounce, while the Dow Jones industrial average DJIA, +1.03% , which counts Cisco as a component, gained 22.8%.

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