Cisco Systems (CSCO) is a top American company known for its networking equipment that are used widely around the world. Over the years, the company has diversified its business to include other areas like security, collaborations, and observability.
Cisco has numerous products like network security, identity and access management, secure access service edge, and threat detection. It also offers other solutions like Cisco Webex, a competitor to Zoom Video and Google Meet.
The company has changed substantially in the past few years. It has moved from being a pure-play hardware seller into a diversified company that makes money in software.
Cisco’s business has been doing well in the past few years, helped by its ongoing diversification and demand for its products. Its annual revenue has jumped from over $49.3 billion in 2019 to over $53.8 billion in the last financial year.
Its stock has been in a strong bull run and has recently jumped to a record high of near $60. It has jumped by almost 62% from its lowest point in 2022, valuing it at over $233 billion.
Cisco’s stock was trading at $58.7 on Tuesday, while its HypeIndex metric has risen to 83%.
Positive hype
Cisco’s positive hype happened because of the strong stock performance. It has jumped to a record high and there are signs that it has more upside in the future.
Analysts are generally bullish on the Cisco stock, with their target being at $62, higher than the current $58. Some of the most bullish analysts are from Citigroup, Bank of America, and Wells Fargo.
Cisco published broadly soft results but those that beat analysts' estimates. Its revenue rose to $13.8 billion, at the upper end of the guidance.
Cisco is expected to benefit from the ongoing tailwinds in the artificial intelligence industry.
The company is seen as a fairly undervalued one since it has a forward price-to-earnings ratio of 15.9, lower than the sector median of 25.
Cisco is a high-margin company whose gross profit margin of 64% is higher than the sector median of 50.5%. Its net profit margin of 17% is also higher than most companies.
Cisco is a future dividend aristocrat that has boosted its payouts in the past 13 years. It has a payout ratio of 45%. It has a dividend yield of 2.73%.
Negative hype
Cisco’s business is starting to slow as its quarterly revenues dropped by 4% from the same period last year. As such, analysts note that there are better growth companies in the market.
The company’s Webex product is facing substantial competition from the likes of Zoom Video, Microsoft Teams, and Google Meet.
Cisco’s business may be impacted by the upcoming Trump regime that is committed to restarting the trade war. Indeed, data shows that its Asian revenues have slumped in the past few months.
Some analysts caution that Cisco’s acquisition of Splunk for $28 billion will likely not have the desired outcome. Historically, large M&A deals don’t achieve the desired objective.
Cisco stock price analysis
The weekly chart shows that the Cisco stock price has been in a strong bull run in the past few months. It recently crossed the important resistance level at $58.53, its highest level in December 2021 and the previous all-time high. It has also flipped the key resistance level at $55.95 into a support level.
Cisco shares remain above the 50-week and 200-week Exponential Moving Averages (EMA). The MACD indicator and the Relative Strength Index (RSI) have continued rising. Therefore, the outlook for the stock is mildly bullish as its revenue growth slows. In this case, the next point to watch will be at $65.
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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
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