Cisco stock forecast: plugging for a strong network in 2022?
A worldwide leader in computer networking products, Cisco (CSCO) was founded in 1984 by Stanford University computer scientists Leonard Bosack and Sandy Lerner. They pioneered the idea of the Local Area Network (LAN) and were instrumental in laying strong fundamentals over which Cisco is built.
Headquartered in California, the company has over 35,000 employees across the globe. It remains an integral part of Silicon Valley electronics and big technology companies.
The late 1990s saw exponential growth in the use and adoption of the internet. As a result, companies like Cisco that specialised in information technology saw a tremendous increase in their valuations.
By the time Cisco had its initial public offering (IPO) in 1990, its market capitalisation was $224m. In March 2000, it beat Microsoft as the world’s most valuable company by crossing the $500m mark. However, when the dotcom bubble burst in 2000 to 2001, Cisco lost close to 86% of its stock value.
Today, the company boasts of routing 85% of internet traffic through its systems. With a mission to shape the future of the internet by creating unprecedented value and opportunity for its customers, Cisco solutions empower networking foundations for service providers, be it corporations, educational institutions or government agencies.
![Cisco’s ‘What we’re proud of’]](https://img.capital.com/imgs/articles/1140xx/__Cisco-stock-forecast--MCT-3733-EN-1.png "Cisco’s ‘What we’re proud of’]")
At the time of writing (14 February 2022), CSCO had last closed at $53.90. Compared to its start of the year trading price of $63.16 on 3 January 2022, the stock has plummeted by 14.66%.
As the company navigates the market in 2022, join us as we undertake a fundamental analysis, catch up on the latest Cisco news and get analysts’ insights on a Cisco share price prediction.
Stock fundamental analysis – Q1 FY 2022
On 17 November 2021, Cisco released Q1 financial results for the period ending 30 October 2021. It reported revenues of $12.9bn, compared to Q1 FY 2021 revenues of $11.9bn. Top-line growth was 8%.
Cisco’s sales are driven by its products and services, both of which reported an increase of approximately 11% and 1%, respectively. On its product sales front, the revenues garnered in Q1 FY 2022 were $9.52bn. Compared to Q1 FY 2021 revenues of $8.58bn, there was growth of 10.95%.
Effective for the first quarter of fiscal year 2022, the company has initiated reporting their revenue in the following categories: secure, agile networks; hybrid work; end-to-end security; internet for the future; optimised application experiences and other products. With its evolving strategic priorities, Cisco believes this reporting style best aligns with its product categories.
Of its product offerings, at $1.37bn in revenues, the internet for the future was touted as the prime contributor to the company’s top-line growth in Q1 FY 2022. As compared to Q1 FY 2021, sales from the internet for the future segment reported a significant increase of 46%.
On its services side, in Q1 FY 2022, reported revenues were $3.37bn. Compared to Q1 FY 2021 revenues of $3.34bn, the increase in sales was 0.89%.
The company also had strong bottom-line numbers, with net income reported at $3bn for the quarter. When compared to Q1 FY 2021 net income of $2.2bn, the increase in Cisco’s profitability has been approximately 37%. As a result of this, diluted earnings per share (EPS) increased by $0.19, from $0.51 to $0.70.
For the three months ending 31 October 2021, Cisco paid approximately $1.56bn in dividends. The previous year, for the same quarter, dividends paid stood at $1.52bn. At a broader level, within the first quarter of fiscal 2022, the company returned nearly $1.8bn to stockholders through share buybacks and dividends.
Chuck Robbins, Cisco’s chair and CEO, commented on the company’s Q1 results:
In anticipation of a strong fiscal 2022, the company released its guidance numbers and growth projections for FY 2022 and Q2. For Q2, the company expects revenue growth within the range of 4.5% to 6.5% and for the fiscal year 2022, the top-line growth is anticipated to be within 5% to 7%.
Recent market news
Cisco stock has been under pressure since the beginning of 2022. Trading at a close price of $63.16, on 3 January 2022, the stock has fallen by nearly 15% to its last close price of $53.90 on 14 February. Owing to Covid-induced supply chain challenges, the company has struggled to maintain its total gross margin, product gross margin and service gross margins from the first quarter of fiscal 2021.
On a GAAP basis, in Q1 FY 2022, total gross margin, product gross margin and service gross margin were 62.4%, 61.5%, and 65.2%, respectively, as compared with 63.6%, 62.7% and 65.8%, respectively, in Q1 FY 2021.
A day after the company published its Q1 FY 2022 financial results, the stock price plummeted by 5.51%. From a close price of $56.76 on 17 November 2022, CSCO stock closed at $53.63 the day after as investors remained sceptical of the company’s lower margins from a year back.
More recently, on 11 February 2022, the Wall Street Journal posted a report that suggested Cisco’s ongoing discussions with Splunk, a software development company for its biggest takeover ever. In a $20bn plus takeover offer, Cisco’s acquisition of Splunk would fuel the former’s strength in network security with the latter’s expertise in data-focused security operations. If these two technology-driven companies were to potentially join hands, it could compete with Palo Alto Networks, a market leader in the security operations space.
While there has been no official confirmation from Cisco or Splunk on this matter, the stocks of the latter shot up by 16% on Friday following Wall Street’s report.
Stock future price forecasts and analyst insights
Sharing a technical analysis on the Cisco stock market, Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory Services, says:
“CSCO has seen a corrective decline from 63.91 witnessed at the end of December 2021. In the process, this decline has taken the stock below all the key moving averages on the daily chart. On the weekly chart, it has slipped and has ended a notch below the 50-week moving average (MA) that presently stands at 54.49. The RS line against the S&P500 index declining and below the 50-period. MA. The stock looks in the process of ending its corrective decline but it has not shown any signs of confirmation of any short-term bottom in place. For any fresh action on the stock, there are no technical triggers. If the stock sees any technical pullback and moves above 55, fresh entry can be considered. Until then, the present technical setup does not offer any trigger to act.”
According to algorithmic forecasting by Wallet Investor, as of 14 February 2022, the CSCO stock price target could be in the range of $63.488 to $64.509 by December 2025.. Additionally, in its Cisco price predictions, it was mentioned that the price could potentially close at $57.523 by December 2022.
Based on data compiled by Market Beat, as of 14 February 2022, of 21 analysts, nine rated CSCO stock a ‘buy’ and 12 suggested a ‘hold’. Their consensus 12-month Cisco stock price target is $63.25 a share. The CSCO stock forecast price, according to Market Beat, varies from the low of $51 to the high of $73. The current analyst price target consensus has an upside of 17.34%, based on the last closing price of $53.90, as of 14 February 2022.
On 19 January 2022, Cisco stock experienced some selling pressure when Goldman Sachs analyst Rod Hall cut the rating to ‘neutral’ from ‘buy’ and set the price target at $65. JP Morgan adjusted its price target to $69 from $70 on 20 January 2022 and reiterated an ‘overweight’ rating. And on 7 February 2022, UBS bumped its price target on CSCO to $58 from $57 but continued to maintain a ‘neutral’ stance.
When looking for CSCO stock forecasts, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ Cisco stock analysis is based on making fundamental and technical studies of the stock’s performance. Past performance is no guarantee of future results.
FAQs
Is Cisco stock a good buy?
While CSCO stock has suffered some headwinds so far in 2022, the company is in the process of a strategic shift. It’s aiming to increase revenues through subscription-based software and services, and broaden its product offerings from just selling networking hardware.
Whether Cisco stock is a suitable investment depends on your own investment objectives. You should conduct your own research and then make a decision regarding Cisco stock buy, sell or hold. It’s important to reach your own conclusion on a company’s prospects and the likelihood of achieving analysts’ targets.
Will Cisco stock go up or down?
As per algorithm-based forecasting service of Wallet Investor, CSCO stock could close at $57.523 by December 2022.
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