Cisco Systems (CSCO) AI Stock Analysis

• Market Cap: $228.00B
• Dividend Yield: 2.93%
• Average Volume (3M): 23.31M
• Price to Earnings (P/E): 25.1
• Beta (1Y): 0.81
• Revenue Growth: -5.34%
• EPS Growth: -30.57%
• Country: US
• Employees: 90,400
• Sector: Technology
• Sector Strength: 40
• Industry: Communication Equipment
• EPS (TTM): 2.28
• Shares Outstanding: 3,978,292,500
• 10 Day Avg. Volume: 30,176,307
• 30 Day Avg. Volume: 23,314,441
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 4.43
• Price to Cash Flow (P/CF): 26.80
• P/FCF Ratio: 29.50
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $71.56
• Price Target Upside: 31.21% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 17

Cisco Systems is performing well financially, with solid profitability and cash flow management. The company's technical analysis shows some short-term challenges, while valuation metrics suggest the stock may be overvalued, although the dividend yield is attractive. The recent earnings call was positive, highlighting strong growth in AI orders and security, but there are concerns about a decline in networking revenue and tariff impacts. Overall, the stock is stable with a positive outlook, but careful consideration of valuation and market conditions is advised.

Positive Factors

AI Opportunities

The expansion of Cisco's partnership with Nvidia to offer converged infrastructure solutions is adding a new addressable market opportunity, utilizing both Nvidia and Cisco silicon with Cisco operating system software.

Campus Switching Demand

Cisco is starting to see a recovery in Campus switching demand, supported by enterprises adding capacity and refreshing older solutions, return-to-office trends, and modernizing network infrastructure.

Cloud Orders Growth

Cloud orders grew over 100% last quarter with significant growth from three of the top six hyperscalers, and no slowdown in spending is observed despite recent investor concerns.

Negative Factors

Executive Departure

The announced departure of a key executive, Gary Steele, is a watchpoint for investors due to its potential impact on execution consistency.

Gross Margin Pressure

For the second half, management guided gross margin to decline, mainly due to US tariffs on China and Mexico.

Security and Observability Revenue

Security and Observability revenue growth was weak, but management noted solid order and RPO growth, driven by new XDR and SASE platforms, and expects growth to accelerate in the second half.

Cisco Systems Business Overview & Revenue Model

Company Description

Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry in the Americas, Europe, the Middle East, Africa, the Asia Pacific, Japan, and China. The company also offers switching portfolio encompasses campus switching as well as data center switching; enterprise routing portfolio interconnects public and private wireline and mobile networks, delivering highly secure, and reliable connectivity to campus, data center and branch networks; and wireless products include indoor and outdoor wireless coverage designed for seamless roaming use of voice, video, and data applications. In addition, it provides security, which comprising network security, identity and access management, secure access service edge, and threat intelligence, detection, and response offerings; collaboration products, such as Webex Suite, collaboration devices, contact center, and communication platform as a service; end-to-end collaboration solutions that can be delivered from the cloud, on-premise or within hybrid cloud environments allowing customers to transition their collaboration solutions from on-premise to the cloud; and observability offers network assurance, monitoring and analytics and observability suite. Further, the company offers a range of service and support options for its customers, including technical support and advanced services and advisory services. It serves businesses of various sizes, public institutions, governments, and service providers. The company sells its products and services directly, as well as through systems integrators, service providers, other resellers, and distributors. Cisco Systems, Inc. has strategic alliances with other companies. Cisco Systems, Inc. was incorporated in 1984 and is headquartered in San Jose, California.

How the Company Makes Money

Cisco Systems generates revenue through multiple streams, primarily from the sale of its hardware products such as routers and switches, which are essential components for building and maintaining computer networks. Additionally, Cisco earns revenue from its software offerings, which include network management and security solutions, as well as its extensive portfolio of collaboration tools, such as Webex. The company also offers subscription-based services, which provide recurring revenue, including technical support, advanced threat protection, and cloud-based services. Cisco's strategic partnerships with other technology companies and service providers, along with its focus on innovation and acquisitions, further bolster its earnings by expanding its product and service capabilities.

Cisco Systems Financial Statement Overview

Summary

Cisco Systems demonstrates a stable financial position with strong profitability and efficient cash flow management. The company maintains a healthy balance sheet with moderate leverage and solid equity. While revenue growth is modest, the company continues to generate significant cash flow, supporting its operations and shareholder returns. Future focus should be on enhancing operational margins and sustaining asset growth.

Income Statement

Cisco's income statement showcases a solid performance with a Gross Profit Margin of 64.8% and a Net Profit Margin of 16.9% in the TTM period. The Revenue Growth Rate is modest at 0.69% from the previous year, indicating stable sales performance. However, the EBIT Margin has declined to 20.0% compared to the previous year's 22.6%, reflecting slight operational challenges. Overall, profitability remains strong, though there is room for improvement in operational efficiency.

Balance Sheet

The balance sheet reflects a healthy financial position with a Debt-to-Equity Ratio of 0.68, indicating moderate leverage. The Return on Equity stands at 20.2%, showcasing efficient use of equity. The Equity Ratio is 37.5%, suggesting robust shareholder equity relative to assets. Despite the strong equity and manageable debt levels, the declining total asset base warrants attention.

Cash Flow

Cisco's cash flow is strong, with a Free Cash Flow Growth Rate of 29.7%, highlighting excellent cash generation capabilities. The Operating Cash Flow to Net Income Ratio is 1.48, indicating effective cash conversion from earnings. The Free Cash Flow to Net Income Ratio is 1.44, underscoring strong cash flow relative to net income. The overall cash position is solid, though consistent capital expenditures could impact future cash reserves.

Breakdown
TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement		Total Revenue
54.18B	53.80B	57.00B	51.56B	49.82B	49.30B
	Gross Profit
35.11B	34.83B	35.75B	32.25B	31.89B	31.68B
	EBIT
10.86B	12.18B	15.03B	13.97B	12.83B	13.62B
	EBITDA
14.62B	15.75B	17.47B	16.79B	15.56B	16.36B
	Net Income Common Stockholders
9.19B	10.32B	12.61B	11.81B	10.59B	11.21B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
38.92B	17.85B	26.15B	19.27B	24.52B	29.42B
	Total Assets
80.02B	124.41B	101.85B	94.00B	97.50B	94.85B
	Total Debt
15.28B	30.96B	8.39B	9.52B	11.53B	14.58B
	Net Debt
11.48B	23.45B	-1.73B	2.44B	2.35B	2.77B
	Total Liabilities
35.32B	78.96B	57.50B	54.23B	56.22B	56.93B
	Stockholders Equity
44.70B	45.46B	44.35B	39.77B	41.27B	37.92B
Cash Flow		Free Cash Flow
13.24B	10.21B	19.04B	12.75B	14.76B	14.66B
	Operating Cash Flow
13.60B	10.88B	19.89B	13.23B	15.45B	15.43B
	Investing Cash Flow
-22.14B	-20.48B	-5.11B	1.55B	-5.29B	3.50B
	Financing Cash Flow
2.84B	6.84B	-11.63B	-16.14B	-12.04B	-18.89B

Cisco Systems Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 54.54
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CSCO, the sentiment is Negative. The current price of 54.54 is below the 20-day moving average (MA) of 60.13, below the 50-day MA of 61.46, and below the 200-day MA of 54.61, indicating a bearish trend. The MACD of -0.24 indicates Negative momentum. The RSI at 51.35 is Neutral, neither overbought nor oversold. The STOCH value of 78.81 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CSCO.

Cisco Systems Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOK	75 Outperform	$26.17B	19.39	8.27%	2.11%	-12.68%	90.73%
CSCO	74 Outperform	$228.00B	25.11	20.02%	2.93%	-5.34%	-30.57%
MSI	73 Outperform	$67.13B	43.55	129.87%	1.03%	8.41%	-7.83%
ERIC	73 Outperform	$23.80B	11,616.67	0.15%	2.48%	-5.59%	―
HPE	67 Neutral	$16.80B	6.33	12.09%	4.07%	10.93%	43.19%
JNPR	60 Neutral	$11.31B	39.46	6.21%	2.59%	-8.82%	-10.01%
Sector *	57 Neutral	$18.54B	9.84	-14.39%	2.71%	5.07%	-23.64%

Cisco Systems Corporate Events

Cisco Systems Anticipates Board Shift as Director Steps Down

Ekta Singh-Bushell has decided not to seek re-election as a director at Cisco Systems, Inc., but will continue to serve in her role until the company’s 2024 annual stockholders’ meeting. This upcoming change presents a significant moment for Cisco as it prepares for a shift in its board’s composition.