- J.P. Morgan joins Bank of America in pointing investors to Cisco as a large technology stock with limited exposure to the trade war with China.
- "We continue to recommend [Overweight] rated Cisco as our top pick for investors as a relative safe haven in this macro backdrop catalyst," J.P. Morgan analyst Samik Chatterjee said.
- Only 3.3% of Cisco's revenue comes from China, according to FactSet.
J.P. Morgan is the latest Wall Street firm to recommend Cisco Systems, saying in a note Thursday that investors trying to protect themselves from the trade war should look to the stock as a technology company with little exposure in China.
"Investors are mindful of stocks with high exposure to China and/or Huawei. We continue to recommend [Overweight] rated Cisco as our top pick for investors as a relative safe haven in this macro backdrop catalyst," J.P. Morgan analyst Samik Chatterjee said in the note.
The nod from J.P. Morgan comes after Bank of America highlighted Cisco's "relatively low exposure to China," especially when compared with some of the other biggest tech stocks. Known as FAANG – Facebook, Apple, Amazon, Netflix and Google parent Alphabet – top tech stocks have been among the hardest hit by the heightened trade risk from China, falling 5% to 11% this month.
Cisco shares have fallen 4.3% this month, by comparison. Both J.P. Morgan and Bank of America see upside in part due to Cisco's limited exposure to China, as well as improving overall prospects.
Only 3.3% of Cisco's revenue comes from China, according to FactSet.
Additionally, with Chinese competitor Huawei caught in the middle of the trade war, Chatterjee said Cisco has the "potential to benefit from market share moderation for Huawei led by the component shortages in multiple product categories."
J.P. Morgan also pointed to Ciena, another technology infrastructure company, as a similarly protected stock that could benefit from the pullback in Huawei's reach.
"Led by strong leadership in execution, we find both Cisco and Ciena well positioned to benefit if Huawei's market share were to moderate," Chatterjee said.
Beyond the FAANG stocks, Goldman Sachs in a note on Tuesday warned investors about a host of companies "with explicit sales exposure to China." Some of the top companies listed were Qualcomm (65%), Broadcom (54%), Micron Technology (51%), Western Digital (39%), Intel (24%) and Nvidia (20%), according to Goldman Sachs.
Correction: This story was revised due to incorrect information about the extent of Netflix' business in China. Netflix says it does not receive material revenue from China. Also, Cisco shares have fallen 4.3% in May. An earlier version misstated the move.