Standpoint Research has initiated coverage on Cisco Systems (CSCO) with a 'buy' rating and a price target of $24 and analyst Ronnie Moas said the market has overreacted to the company's weak outlook.

Recently, Cisco expected revenue growth of 9-12 percent in fiscal 2011, lower than the 13.1 percent analysts had expected on average. Meanwhile, a forecast for 3-5 percent revenue growth in the fiscal second quarter also came in below Wall Street's expectations for 13 percent.

California-based Cisco's dismal outlook had stunned the market and send the stocks of other tech heavy weights like IBM, Intel and Oracle tumbling.

In our opinion, the market has over-reacted to the news last week with nearly 1,000,000,000 shares switching hands since Wednesday, Moas wrote in a note in a note to clients.

Moas said the weaker guidance reflects slow public sector spending, which has management keeping a conservative outlook over the next few quarters.

The analyst said the drop in public spending should not have been a surprise and not much has changed versus 90-180 days ago. If the market is looking out 6-12 months and the economy is in recovery mode, Cisco will be fine and this will be looked back on as a rough patch that did not last more than a couple of quarters. Cisco, one of the leading network gear makers, continues to gain market share in all major product areas, the analyst noted.

This is not the first time CSCO has had to deal with adversity and challenges ... and it won't be the last. CSCO has a history of responding well to these types of situations. As long as the economy holds up, the concerns should be disregarded by calendar Q2 2011, Moas wrote.

The analyst added that Cisco is in good financial health with $40 bilion in cash and said we are confident they will put this money to good use with share repurchases being one option Chambers will consider. CSCO is an innovative company that should be able to come out of this in good shape.

Morevoer, Moas said this is the third time in its seven years that he sees an opportunity with CSCO on a valuation basis.

The analyst said: We exited CSCO at $32.75 on Nov.7, 2007 with a 77 percent gain (34-month holding period). The second time around we exited CSCO was on June 1, 2009 at $19.50. In our second time with CSCO the shares beat the S&P by 900 bps in a down market (15-month holding period).

Cisco shares are now trading at 1998 prices adjusted for inflation. CSCO has under-performed the Nasdaq by 4000 basis points (bps) on the two-year chart and under-performed the S&P by 2000 bps. It is unlikely that CSCO will under-perform the market going forward.

This may be a position we exit before it hits our target price of $24 if the shares out-perform the S&P by 1000-1500 bps before then, Moas said.

Shares of Cisco closed Monday's regular trading session at $19.95 on Nasdaq.

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