Cisco Systems, Inc. (CSCO) is a designer and seller of Internet-Protocol-based networking and products related to the IT and communications industry internationally. The company sells its products to businesses, public institutions, and governments.
The COVID-19 pandemic has highlighted the critical importance of the communications infrastructure sector. We've learned just how significant a role it plays in keeping businesses, governments, and societies connected and functioning.
CSCO’s focus on providing the technology and solutions its customers need to meet and accelerate their digital communication structures amid a growing global dependence on networking and virtual connectivity may soon help the stock cross the $50 threshold.
CSCO’s digital-first strategy and its innovative business model have allowed it to gain 26.3% over the past nine months. This impressive performance combined with several other factors has helped CSCO earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates CSCO:
Trade Grade: A
CSCO is currently trading above its 50-day and 200-day moving averages of $40.68 and $42.27, respectively, indicating that the stock is in an uptrend. Also, the stock has gained 11% over the past three months, reflecting solid short-term bullishness.
CSCO’s service revenue has increased 2% year-over-year to $3.34 billion in the fiscal first quarter ended October 31, 2020. The increase in revenue was primarily attributable to the growth in security revenue. Cash flows from operating activities rose 14% from the year-ago value to $4.10 billion, while cash and cash equivalents increased 2% from the prior-year quarter to $30 billion over this period.
On October 7, CSCO and Verizon Business announced that they are working together to offer 5G-Enabled, MEC solutions to sports and entertainment venues. This will allow the company to deliver cloud-powered services to meet customers’ demand for reliable network connectivity, security, and control.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, CSCO is well positioned. The stock is currently trading 10.9% below its 52-week high of $50.28, which it hit on February 12.
The company’s EBITDA has grown at a CAGR of 1.8% over the past three years, while net income increased at a CAGR of 2.6% over this period. CSCO’s EPS has increased at a CAGR of 8.8% over the past three years. This can be attributed to the company’s innovative portfolio and its impressive growth in the infrastructure platform.
Peer Grade: B
CSCO is currently ranked #18 of 53 stocks in the Technology – Communication/Networking industry. Other popular stocks in this industry are Motorola Solutions, Inc. (MSI), Ciena Corporation (CIEN) and Arista Networks, Inc. (ANET)
While ANET outran CSCO by gaining 69.7% over the past nine months, MSI and CIEN returned 13.6% and 25.1%, respectively, over this period.
Industry Rank: B
The Technology – Communication/Networking industry is ranked #44 of the 123 StockNews.com industries. The companies in this industry are engaged in manufacturing equipment used to transmit data across communications networks.
The ongoing shift to remote work because of the pandemic has been driving the demand for networking infrastructure and connectivity industry. The industry has been strengthened by a significant spike in the use of broadband services, as more people are working from home and rely on video conferencing to host meetings.
Overall POWR Rating: B (Buy)
CSCO is rated “Strong Buy” due to its impressive financials, short- and long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.
CSCO is well positioned to gain in the coming months despite climbing 26.3% over the past nine months. With more people learning how to use remote technology and relying on data center operators, the company may experience a significant surge in its networking services and hit the $50 mark shortly.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is positive for CSCO. It has an average broker rating of 1.7, indicating favorable analyst sentiment. The consensus EPS estimate of $3.37 for the next year represents a 6.3% improvement year-over-year. Moreover, CSCO has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $50.62 billion for the next year represents a 3.8% increase from the same period last year.
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CSCO shares rose $0.06 (+0.13%) in after-hours trading Friday. Year-to-date, CSCO has declined -2.00%, versus a 16.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.Will Cisco Systems Stock Soon Eclipse $50? appeared first on StockNews.com