Cisco Systems Inc (NASDAQ: CSCO) shares rose in 2021 as the market shifted to “value” companies because of the recovering U.S. economy. CSCO stock has fallen this year on rising interest rates and supply-chain difficulties. Bullish analysts expect CSCO to gain market share from Arista Networks. Microsoft, Facebook, and Amazon.com chose Arista over Cisco for cloud data centers. IBD Stock Check-up rates Arista stock 99 out of 99. Market volatility may not be the time to invest. In 2023, cloud infrastructure spending should slow. Cisco shares rose on Aug. 17 after reporting fourth-quarter profits. Cisco forecasts more robust fiscal 2023 sales. As supply chain concerns ease, analysts question profit margins. Cisco predicts 4% to 6% sales growth for fiscal 2023 vs. Wall Street’s 3% growth to $52.7 billion. Analysts expected Cisco Systems Inc (NASDAQ: CSCO) to earn $3.49 to $3.56 per share. Cisco’s stock forecast hinges on cloud infrastructure and business and telecom network spending. Recession fears are rising.
Cisco Systems Inc Behind S&P 500
In 2021, Cisco stock rose 41% and fell 31% in 2022 amid a Nasdaq bear market. CSCO stock has underperformed the 19%-down S&P 500. The tech icon wants to expand subscription-based software and service revenue and shift away from selling network switches and routers. Cisco’s transition to software subscriptions has stagnated. The software has been 30% of overall revenue for seven quarters. During the coronavirus outbreak, business spending on data networks stalled. If remote work becomes common, corporate networks may lose importance. Cisco Systems Inc (NASDAQ: CSCO) stock must invest in next-generation enterprise networks. The company helps corporations construct hybrid network architectures using on-premise data centers and cloud computing.
Cisco Stock: Acquisition Needed?
Moody’s believes CSCO stock has $20 billion in cash. The corporation slowed stock buybacks. Analysts say Cisco could buy a software startup. Cisco plans to build its Webex video conferencing product against Microsoft and Zoom. It bought Socio Labs to improve Webex events and develop holographic communications. Scott Herren from Autodesk is Cisco’s new CFO. The corporation has more cash than most U.S. tech companies making institutional investors like the company’s 4% dividend yield.
Cisco’s Acquisition-Driven Growth
Acquisitions have boosted Cisco’s revenue. Analysts expect Cisco margins to rise as software sales grow. Cisco agreed to buy U.K.-based IMImobile for $730 million in late 2019. Cisco bought ThousandEyes for $1 billion in May 2020 and AppDynamics for $3.7 billion. In 2017, it paid $1.9 billion for BroadSoft.
Cisco Systems Inc (NASDAQ: CSCO) bought Duo Security for $2.35 billion in July 2019, its largest cybersecurity acquisition since 2013. Cisco’s acquisition of Duo Security boosted its zero-trust cybersecurity capabilities. New accounting regulations have helped revenue recognition besides investments. Multiyear software licenses must be recognized upfront under ASC 606.
Cisco Stock Q4 Guidance
Adjusted earnings were 83 cents per share in July, down 1% year-over-year. Including acquisitions, revenue was $13.1 billion. FactSet predicts Cisco will earn 82 cents per share on $12.73 billion in revenue. Cisco estimated an October profit of 82 cents to 84 cents, compared. Cisco predicted 2% to 4% revenue growth vs. flat sales.
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