From Nasdaq: 2024-07-10 11:01:00

Cisco Systems (CSCO) shares have declined 9.4% year to date, underperforming the Zacks Computer & Technology sector. In the third quarter of fiscal 2024, Cisco reported revenues of $12.7 billion, a 12.8% decline year over year. Product orders were unchanged excluding Splunk acquisition. Cisco’s long-term prospects ride on innovation in AI-related workload opportunities.

Cisco’s Security segment is noteworthy, with solutions like XDR, Secure Access, and Multicloud Defense suites driving growth. Acquisitions, including Splunk and Isovalent, have strengthened the portfolio. Annual Recurring Revenues surged 22% to $29.2 billion in the fiscal third quarter. New capabilities for Security Cloud aim to enhance security architecture in the AI era.

Cisco’s expanding partner base, including NVIDIA, Lenovo, and AT&T, is driving growth. Partnership with NVIDIA in the AI space has introduced the Cisco Nexus HyperFabric AI cluster solution to scale generative AI workloads efficiently. Collaboration with AT&T offers 5G Fixed Wireless Access through the Meraki MG52 and MG52E gateways. Cisco’s near-term outlook remains lackluster, as shares continue to trade below the 50-day moving average.

Cisco expects revenues between $13.4 billion and $13.6 billion in the fourth quarter of fiscal 2024. For fiscal 2024, revenues are forecasted between $53.6 billion and $53.8 billion. The company anticipates inventory destocking to boost demand in fiscal 2025. Despite challenges, Cisco expects revenue growth to be in the low to mid-single-digit range for the fiscal year, with the Zacks Consensus Estimate for fiscal 2025 revenues indicating a 3.06% year-over-year growth.

Cisco trades at a premium, with a forward 12-month P/S of 3.34X compared with the Zacks Computer Networking industry’s 3.05X. Investors should wait for a better entry point for Cisco, currently holding a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for fiscal 2025 earnings has declined slightly, suggesting a 4.53% year-over-year decline. Cisco’s prospects in the AI-driven networking space face stiff competition, with the company’s shares underperforming the Zacks Computer & Technology sector.



Read more at Nasdaq: Cisco Declines 9.4% Year to Date: How to Play CSCO Stock Now?