Cisco Hits 52-Week High: Is it The Right Time to Buy the CSCO Stock?
Cisco Systems CSCO shares hit a 52-week high of $56.58 on Thursday and finally closed at $56.40, up 11.6% year to date, outperforming the Zacks Computer-Networking industry’s return of 10.9%.
In the past month, CSCO shares have appreciated 9.6%, outperforming the industry’s return of 9.3%. The broader Zacks Computer & Technology sector inched up 1.8% over the same timeframe.
The outperformance can be attributed to CSCO’s improving near-term prospects, with strong AI-related order growth. Its rich partner base, which includes the likes of Microsoft, NVIDIA NVDA, Lenovo, and AT&T T, deserves attention.
One-Month Performance
Image Source: Zacks Investment Research
Cisco shares are also trading above the 50-day and 200-day moving averages, indicating a bullish trend.
CSCO Shares Trade Above 50-Day & 200-Day SMA
Image Source: Zacks Investment Research
Cisco’s FY25 Outlook Offers Mixed View
For fiscal 2025, revenues are expected between $55 billion and $56.2 billion. Cisco reported revenues of $53.8 billion in fiscal 2024.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $55.61 billion, suggesting 3.36% year-over-year growth.
However, CSCO’s earnings outlook is disappointing. Non-GAAP earnings are anticipated between $3.52 and $3.58 per share. CSCO reported non-GAAP earnings of $3.73 per share for fiscal 2024.
The consensus mark for earnings is pegged at $3.56 per share, unchanged over the past 30 days, indicating a 4.56% year-over-year decline.
Cisco Systems, Inc. Price and Consensus
Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote
CSCO’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 4.93%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Cisco’s Prospects Ride on an Innovative Portfolio
Nevertheless, the increase in AI-related workload presents a strong growth opportunity for Cisco, thanks to an innovative portfolio. Total growth opportunity is expected to be $950 billion, with current markets expected to witness a CAGR of 6% and expansion markets likely to see a CAGR of 16% between 2025 and 2027 timeframe.
Cisco’s aggressive investments in AI, cloud, and cyber security are noteworthy. It currently has more than $1 billion in AI orders from hyperscalers, with more than $1 billion in orders in the pipeline for fiscal 2025.
The Security segment is particularly noteworthy, with solutions like XDR, Secure Access and Multicloud Defense suites that are winning customers. Current markets are expected to witness a CAGR of 8% and expansion markets are likely to see a CAGR of 14% between the 2025 and 2027 timeframe. The Splunk acquisition is expected to further boost CSCO’s prospects in the domain, with addressable markets worth $118 billion.
In the infrastructure domain, Cisco’s addressable market is expected to be $221 billion. CSCO has been benefiting from the growing use of AI and cloud with the ongoing digital transformation happening at enterprises.
Recovery in Networking demand bodes well for Cisco. Its switching, routing, security, and observability are enabling customers to automate network operations with cutting-edge innovations like AI-powered robotics and unmatched supply-chain visibility. Investment in AI operations and autonomous networks by service providers is helping customers monetize B2B offerings.
Strong Partner Base Drives CSCO’s Prospects
The Cisco-NVIDIA partnership has introduced the Cisco Nexus HyperFabric AI cluster solution, a new end-to-end infrastructure designed to scale generative AI workloads efficiently.
Cisco is collaborating with AT&T to introduce a seamless digital buying experience for businesses, offering 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways.
Cisco’s Silicon One continues to gain momentum. Meta Platforms META is planning to deploy the Cisco 8501, which combines the power of the Cisco Silicon One G200 and a Cisco-designed and validated hardware system.
It is launching two new solutions based on Cisco Silicon One G200 — the Cisco 8122-64EH/EHF and the Cisco Nexus 9364E-SG2 — which support AI and machine learning buildouts across enterprise datacenters and hyperscalers.
Cisco Stock Trading at a Premium Right Now
The Cisco stock is trading at a premium right now, as suggested by the Value Score of C.
CSCO’s forward 12-month Price/Sales ratio of 4.01X is higher when compared with the industry’s 3.49X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Here’s Why Cisco Shares are a Buy
Cisco’s expanding portfolio, a growing footprint in the cybersecurity domain, and a strong partner base are the key catalysts despite a premium valuation.
A strong liquidity position is expected to help Cisco maintain its dividend and share repurchase. In fiscal 2024, the company returned $3.6 billion to shareholders, including share repurchases worth $2 billion. It paid out dividends worth $6.38 billion.
Cisco currently carries a Zacks Rank #2 (Buy), which implies that it is the right time for investors to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AT&T Inc. (T) : Free Stock Analysis Report
Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Meta Platforms, Inc. (META) : Free Stock Analysis Report