Case Study: Cisco (CSCO) stock according to high performing analysts
Key Points
Performance
Cisco (CSCO) shares rose by 6.75% this week, pushing their year-to-date gains into positive territory; CSCO is now up by 5.90% on the year. This compares poorly to the S&P 500 which is up by 6.67% during 2023 thus far.
Event & Impact
Cisco posted its fiscal 2023 second quarter results this week, beating Wall Street estimates on the top-line and meeting expectations on the bottom-line. During Q2, CSCO’s revenue totaled $13.6 billion, beating Wall Street’s consensus estimate by $190 million, representing 7.1% year-over-year growth. Cisco’s Q2 non-GAAP earnings-per-share came in at $0.88, beating estimates by $0.02/share.
Noteworthy News:
Cisco not only beat estimates on both the top and bottom lines, but also raised full-year 2023 growth guidance up to levels well above Wall Street’s consensus. The company also announced its 12th consecutive annual dividend increase, helping to bolster the bullish sentiment surrounding shares.
Nobias Insights
75% of recent articles published by credible authors focused on Cisco shares offer a “bullish” bias. 1 out of 3 credible Wall Street analysts who cover CSCO believe shares are likely to rise in value. The average price target being applied to CSCO by these credible analysts is $58.33, which implies upside potential of approximately 14.9% relative to the stock’s current share price of $50.77.
Bullish Take Yuvraj Malik, a Nobias 4-star rated author, said, “Cisco Systems Inc CSCO.O raised its full-year revenue growth forecast on Wednesday, banking on its ability to push backlog orders quickly and rapid adoption of 5G technology to keep demand upbeat.”
Bearish Take Nobias 5-star rated author, Reinhardt Krause said, “Cisco's pivot to subscription software revenue has stalled.” Krause said, “During the coronavirus pandemic, corporate spending on data networks slowed amid increased office vacancy rates. One view is that corporate networks will be less important if remote work becomes entrenched”
CSCO Feb 2023
Cisco (CSCO) posted its fiscal 2023 second quarter earnings this week, beating Wall Street’s estimates on both the top and bottom lines. The company also established guidance for the full year in 2023 which was well above consensus estimates.
This beat and raise quarter caused CSCO shares to rally by 6.75% this week. This 6.75% rally pushed the stock’s year-to-date into positive territory. Now, Cisco is up by 5.90% on the year. This compares poorly to the S&P 500, which is up by 6.67% thus far during 2023.
However, the average price target currently being applied to CSCO shares by the credible Wall Street analysts that Nobias tracks implies that the stock has more room to run, with upside potential of approximately 15%.
Bullish Nobias Credible Analysts Opinions:
Yuvraj Malik, a Nobias 4-star rated author, also covered CSCO’s recent earnings report and highlighted the company’s future guidance.
Malik wrote, “Cisco Systems Inc CSCO.O raised its full-year revenue growth forecast on Wednesday, banking on its ability to push backlog orders quickly and rapid adoption of 5G technology to keep demand upbeat.” He reported, “The company forecast fiscal 2023 revenue growth between 9% to 10.5%, compared with its earlier forecast of 4.5% to 6.5% growth.”
With regard to Cisco’s dividend, Tradevestor, a Nobias 4-star rated author, published an article this week highlighting the company’s 12th consecutive annual dividend increase. Cisco increased its quarterly dividend by a penny, from $0.38/share to $0.39/share and Tradevestor wrote, “Cisco's new quarterly dividend of 39 cents per share gives it a nice round current yield of 3.25% based on today's closing price.”
Looking at Cisco’s dividend growth history, the author said, “Since first initiating a dividend of 6 cents in 2011, Cisco's quarterly dividend has now gone up more than 6-fold in 12 years. Impressive to say the least.” “The dividend growth rate slowdown continues: going from 24% to 11% to 13% to 6% around 3% the last four years, including the current increase,” they said
Furthermore, Tradevestor touched upon share repurchases as well, stating, “While Cisco did not announce a new buyback this time around, the $15B buyback it announced last year is likely still in effect and is large enough to retire about 300 Million shares in total.” “I continue to believe Cisco Systems, Inc. is in the midst of a successful turnaround and I may soon initiate a position in the stock,” they said when concluding their piece.
Bearish Nobias Credible Analysts Opinions:
After Cisco posted its Q2 earnings, Nobias 5-star rated author, Reinhardt Krause, published an article titled, “Is Cisco Stock A Buy On Improved 2023 Outlook?”
Looking at the stock’s quarterly results, Krause wrote, “Cisco reported reported fiscal second quarter adjusted earnings of 88 cents per share on revenue of $13.6 billion, topping estimates of 85 cents and $13.42 billion.”
Regarding future guidance, Krause said, “For the current April quarter, it expects sales growth of 11% to 13% and EPS of 96 cents to 98 cents. Analysts had estimated 89 cents EPS for the April-ending period.” He continued, “Management raised the fiscal-year profit forecast to $3.73 to $3.78 per share.”
While the guidance increase was widely seen as impressive - sparking CSCO’s 6.75% rally this week - Krause noted that the company’s operations still face growth headwinds. He said, “The tech icon aims to increase recurring revenue from subscription-based software and services and shift away from its core business of selling network switches and routers.” “But,” he continued, “Cisco's pivot to subscription software revenue has stalled.”
Krause said, “During the coronavirus pandemic, corporate spending on data networks slowed amid increased office vacancy rates. One view is that corporate networks will be less important if remote work becomes entrenched” “As a result,” he stated, “Cisco stock needs to hike investments in next-generation enterprise networks.”
Krause went on to highlight Cisco’s past success with regard to mergers and acquisitions, stating:
Cisco in late 2019 agreed to buy U.K.-based IMImobile, which sells cloud communications software, in a deal valued at $730 million.
In May 2020, Cisco acquired ThousandEyes, a networking intelligence company, for about $1 billion.
In 2017, Cisco acquired software maker AppDynamics for $3.7 billion. It bought BroadSoft for $1.9 billion in late 2017.
In July 2019, Cisco acquired Duo Security for $2.35 billion, marking its biggest cybersecurity acquisition since its purchase of Sourcefire in 2013.
He also said, “Cisco in 2019 agreed to buy Acacia Communications for $2.6 billion in cash. China's government delayed approval of the deal. In January 2021, Cisco upped its offer for Acacia to $4.5 billion and the deal finally closed.”
Looking at the potential for ongoing M&A to serve as a positive catalyst for shares, Krause wrote, “There's more than $20 billion in cash on the balance sheet of Cisco stock, says Moody's. The company has slowed buybacks of its own stock. Some analysts speculate Cisco could make a large acquisition of a software company.”
Krause also implied strong demand for the company’s stock in the meantime, writing, “The company remains one of the top U.S. tech companies in terms of cash on its balance sheet. With 4% dividend yield, CSCO stock still finds support among institutional investors.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Krause also implied strong demand for the company’s stock in the meantime, writing, “The company remains one of the top U.S. tech companies in terms of cash on its balance sheet. With 4% dividend yield, CSCO stock still finds support among institutional investors.”
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 75% of recent articles published on Cisco by the credible authors that the Nobias algorithm tracks have expressed a “bullish” sentiment. Yet, 2 out of the 3 credible Wall Street analysts that Nobias tracks who have expressed an opinion on CSCO shares are bearish on the stock
However, the average price target amongst those 3 individuals for CSCO shares is $58.33, which implies upside potential of approximately 14.9% relative to CSCO’s current price of $50.77.
Therefore, it appears that the strong bullish sentiment being expressed by the one credible analyst who believes that CSCO is likely to increase in value overshadows the price targets of the two bears.
Disclosure: Nicholas Ward is long CSCO. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.