Cisco’s Troubles and Forecasts
Cisco Systems (CSCO) shares have taken a 9.3% dip this year, trailing the Computer & Technology sector by 10.6%. The company faces challenges in networking sales due to subdued demand from telecommunication and cable service providers, as well as intense competition.
As Cisco anticipates its fourth-quarter fiscal 2024 results, revenue projections hover between $13.4 billion and $13.6 billion, with earnings expected to fall between 84 and 86 cents per share.
The Long-Term Innovations of Cisco
Cisco’s ventures into AI-driven networking might counterbalance its current struggles. AI-related workload expansions could offer a substantial opportunity, with a forecasted growth potential of $950 billion by 2030.
In the cybersecurity sector, Cisco’s solutions like XDR and Multicloud Defense suites are expected to elevate its position. Additionally, the infrastructure domain presents a massive addressable market valued at $221 billion for the company.
Cisco’s Strong Partnerships and Prospects
The collaboration between Cisco and prominent partners like Microsoft, NVIDIA, Lenovo, and AT&T bodes well for the company’s future. Initiatives such as the Cisco Nexus HyperFabric AI cluster solution and offerings in the cybersecurity space are propelling Cisco towards a brighter outlook.
Moreover, as Cisco completes its inventory destocking by July, there is an optimistic sentiment for fiscal 2025. The company forecasts revenue growth in the low to mid-single-digit range, potentially reaching $55.31 billion in fiscal 2025.
Cisco’s Valuation and Trading Indicators
The stock’s current forward 12-month P/S ratio of 3.34X indicates that Cisco is trading at a premium relative to the industry average of 2.88X. Trading below the 50-day moving average hints at a bearish trend.
Despite the promising prospects, challenges such as high interest costs from acquisitions like Splunk are likely to impact Cisco’s margins in fiscal 2025.
In Closing
While Cisco faces hurdles in the networking sector, its diverse portfolio, cybersecurity advancements, and robust partnerships could fuel a resurgence in fiscal 2025. Cisco’s current Zacks Rank #2 (Buy) reflects a tempered optimism for the future.