The article discusses Cisco Systems Inc.’s recent earnings report and the impact on its valuation. Despite a slight decrease in stock price following the earnings release, the author reaffirms their “strong-buy” rating for Cisco. The company’s growth plan focuses on networking equipment, which is crucial for supporting the increasing bandwidth requirements of AI data centers. Cisco’s market share in the networking industry is compared to competitors like Juniper Networks and Arista Networks.
The article also highlights the growth potential in various segments of Cisco’s business, including networking, cybersecurity, IoT, and collaboration software. The worldwide networking market is expected to grow at a CAGR of 6.88%, presenting significant opportunities for Cisco. The company’s addressable market is projected to increase to $682.41B by 2028/2029, demonstrating strong growth potential.
A valuation of Cisco is conducted through a DCF model, considering various financial metrics and assumptions. The model suggests a fair price per share of $63.63, representing a 28.1% upside from the current stock price. The future stock price for 2029 is estimated at $92.46, indicating a 14.4% annual return. The author reiterates their bullish outlook on Cisco, citing the addition of Splunk’s revenue as a key driver of future growth.
However, the article also highlights potential risks to Cisco’s growth, including historical slow revenue and operating income growth rates. The company’s cybersecurity, collaboration, and services segments are also interconnected with the networking segment, posing a risk if there is a slowdown in networking.
In conclusion, despite the stock price struggles and historical trends, the author remains optimistic about Cisco’s undervalued potential. The rigidity of the stock price is seen as an advantage for investors looking to capitalize on future upside. The addition of Splunk’s revenue and growth prospects in various segments contribute to the author’s “strong-buy” rating for Cisco.
Article Source
https://seekingalpha.com/article/4694384-cisco-5k-new-splunk-customers-means-1-4b-in-potential-additional-revenue