Cisco Systems Inc (NASDAQ:CSCO) has seen its stock price decline to $47 per share, 26% below its pre-inflation high in December 2021. This decline is due to slowing product sales, reduced network spending by large companies, and competition from smaller networking companies. In the third quarter of FY24, Cisco’s revenue dropped nearly 13% year over year to $12.7 billion.
Over a longer period, CSCO stock has remained relatively flat, moving from around $45 in early 2021 to its current level. Compared to the S&P 500, Cisco’s performance has been lackluster, with returns of 42% in 2021, -25% in 2022, and 6% in 2023. In comparison, the S&P 500 returned 27% in 2021, -19% in 2022, and 24% in 2023, highlighting CSCO’s underperformance in those years.
Despite these challenges, there is potential upside for Cisco stock if it can recover to its 2021 levels, requiring a gain of about 35% to reach $64 per share. Factors that could boost Cisco’s stock price include its move towards a recurring revenue model, focus on cybersecurity, and the company’s lower valuation compared to its peers.
In terms of economic trends, Cisco may face challenges in the current macroeconomic environment with high oil prices and interest rates but could outperform in the event of an economic downturn due to its focus on digitalization and networking spending trends.
Looking back at historical market crises, during the 2007-08 financial crisis, Cisco stock fell over 55% but rebounded strongly, while the S&P 500 index experienced a 51% drop followed by a 48% rally. In the current inflationary shock scenario, Cisco’s fundamentals have remained strong, with revenue increasing from $49 billion in 2020 to $57 billion in FY23. However, the company now carries about $32 billion in debt after acquiring Splunk for $28 billion.
In conclusion, Cisco’s stock has the potential for upside once market sentiment improves and fears of a recession subside. Despite facing challenges in recent years, Cisco’s focus on recurring revenue, cybersecurity, and lower valuation compared to its peers could help drive its stock price higher in the future.
Article Source
https://www.forbes.com/sites/greatspeculations/2024/06/27/will-higher-software-sales-splunk-deal-drive-cisco-stock-back-to-60/
