16 November 2022

Insights

Cisco Stock poised for a rally, or hibernation?

Cisco Systems, Inc once dominated market networking tools, computer software, telecommunications, and other high-tech services and goods. They are still a major player in the tech space, but they are also over 30 years old. Are they still leading the field, or are they falling behind?

With over $51 billion in annual revenue and close to 80,000 people on the payroll, Cisco is still one of the biggest technological businesses in the world. Coming in at number 74 on the Fortune 100. Their place in the hi-tech world is still measurable and their logo still carries a quality association, and yet, the stock price is falling and has been all year. Will it rebound?

CSCO on the charts

2022 has been a hard year for Cisco stock (CSCO) showing a year-on-year decline of 30%, which is weird because there hasn’t been a huge tech fail worth mentioning, and the competitors are struggling too. Cisco products and services are still considered to be global leaders in high demand, so something else must be driving CSCO prices.

It seems size or sentiment arn’t moving the market, and neither are revenue reports. 

Revenue rise

Cisco expects sales to increase 2-4% with a predicted revenue of $13 billion, and with Cisco's substantial order backlog, revenues can still grow, even if orders don’t. Cisco's earnings report for 2022 paints a rosy picture for investors planning to hold CSCO over Q4, despite how the stock price is currently behaving.

Cisco has released its financial results for the fourth quarter and fiscal year that concluded on July 30, 2022. Cisco forecasts fourth quarter sales of $13.1 billion, net income of $2.8 billion, and non-GAAP net income of $3.4 billion. The highest full year non-GAAP earnings per share in the history of the firm were achieved. All in all, a healthy company at face value.

Supply & Demand

As is the case for so many other tech companies, supply chain problems for electronic parts have been shaky for over a year. Cisco announced back in August that their logistics have adapted to current conditions, and are improving with consistency. Good news for everyone.

Senior management expect the company to surpass the projections of 2022Q4 and 2023Q1, although they have expressed some concerns about macroeconomic conditions that may still catch up with Cisco and cause some demand issues. The same can be said for every company on the planet.

Should you trade Cisco?

Cisco is saying the future is bright and you can invest. No real surprise there. The real question is, will the world continue to need Cisco? There is growing demand and increased spending on network security, service providers, and data centers. The company shows positive revenue with a backlog of orders and a stable supply & demand chain in place… for now.

The recent rise of CSCO from $40 to $44 may well be the beginning of a long climb. It all sounds quite positive, and some traders might see CSCO as a “buy” opportunity, But before you trade CSCO, consider a big picture overview.

The company growth was 2% this year, and 3% last year. For some, this is a major cause for concern. Big companies today demand constant growth. This ever-expanding strategy is one cause of recessionary resets, but it is also a great measure of an entity’s health.

After a company’s growth fizzles, it often falls into the realm of stability. Stability leads to decline, decline leads to death. Companies try to keep the growth momentum for as long as possible, pushing death far into the future, but that can’t be said for Cisco. We’ve seen stabilization in both market share, sales, revenue, and stock price.

If Cisco is losing grip on the market, nothing major will happen soon. Who knows, maybe Elon Musk will buy it. One thing looks pretty certain, whatever way it goes, it’s likely going to be slow.

Start monitoring news on Cisco. Revenue, new product releases, sales, everything you can find. Take a step back and ask yourself if the big picture is negative or positive. If you see a trend, the chances are, the stock prices will eventually follow.

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