Cisco Systems CSCO shares soared to a 52-week high of $56.58 on Thursday, eventually settling at $56.40. This surge represents an 11.6% year-to-date increase, outperforming the Zacks Computer-Networking industry’s return of 10.9%. In the past month alone, CSCO shares have seen a 9.6% rise, outshining the industry’s growth of 9.3%. The broader Zacks Computer & Technology sector had a more modest increase of 1.8% over the same timeframe.

Recent Performance and Moving Averages

Cisco shares have also exceeded the 50-day and 200-day moving averages, signaling a bullish trend in the market.

Cisco’s Fiscal Year 2025 Revenue Forecast

For fiscal 2025, Cisco anticipates revenues to fall between $55 billion and $56.2 billion, compared to the $53.8 billion in revenues reported in fiscal 2024. The Zacks Consensus Estimate for fiscal 2025 foresees revenues reaching $55.61 billion, translating to a 3.36% year-over-year growth. On the earnings front, the outlook is less optimistic, with non-GAAP earnings projected to range from $3.52 to $3.58 per share, down from the $3.73 per share recorded in fiscal 2024. The consensus, at $3.56 per share, remains unchanged over the past 30 days, implying a 4.56% year-over-year decrease.

Examining Cisco’s Product Portfolio and Market Potential

Despite challenges, Cisco’s innovative product portfolio positions it favorably in the AI, cloud, and cyber security sectors, with the company’s AI-related opportunities estimated at $950 billion. Cisco’s robust investments are reflected in over $1 billion of AI orders from significant players, a figure expected to rise in fiscal 2025. Particularly, the Security segment stands out, offering solutions like XDR and Multicloud Defense suites that resonate with clients, whilst the Splunk acquisition is poised to bolster Cisco’s position in this domain.

Cisco’s Infrastructure segment targets a $221 billion market, capitalizing on the surge in AI and cloud adoption amidst corporate digital transformations. A resurging Networking demand, fuelled by pioneering innovations like AI-powered robotics and enhanced supply-chain visibility, positions Cisco optimally in the market.

The Strength of Cisco’s Partnerships

Cisco’s collaborations, such as the one with NVIDIA, have borne fruit, resulting in the creation of novel offerings like the Cisco Nexus HyperFabric AI cluster solution, designed to scale generative AI workloads efficiently. Partnerships with entities like AT&T are enhancing digital avenues for commercial clients, including 5G Fixed Wireless Access options through innovative gateways like the Meraki MG52 and MG52E.

Current Valuation of Cisco Stock

The current premium valuation of Cisco stock is evident in its Value Score of C, with a forward 12-month Price/Sales ratio of 4.01X, compared to the industry average of 3.49X.

Why Cisco Stock is Still a Viable Investment

In spite of the premium valuation, Cisco’s expanding portfolio and strategic position in cybersecurity are compelling reasons to consider the stock. Additionally, Cisco’s solid financial standing is poised to sustain dividends and share repurchases, with previous returns to shareholders totaling $3.6 billion in fiscal 2024, a combination of $2 billion in buybacks and $6.38 billion in dividends. Cisco’s current Zacks Rank #2 (Buy) suggests an opportune moment for investors to consider Cisco as a viable addition to their portfolios.

Key Takeaways for Investors

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