Cisco Systems stock continued its recent downward trend, reaching its lowest level since May 13 as the recent rally stalled. It dropped to $105, down by 20% from its highest level this year, erasing billions of dollars in value as its market capitalization fell from $513 billion to $414 billion.
Cisco Systems stock dives amid profit taking
CSCO stock has slumped as investors booked profits as the networking giant jumped to a record high. This retreat continued after releasing its earnings report on August 12, which showed that its revenue and profits surged.
Cisco Systems’ revenue and profits continued soaring, helped by the ongoing demand for its solutions. Its results showed that revenue jumped by 18% in the last quarter to $17.3 billion, driven by demand from hyperscalers.
In a statement, the management said that its AI infrastructure orders jumped to $4 billion, bringing its annual increase to $9.3 billion. This growth will likely continue in the near term as the AI supercycle gains momentum.
In a statement this week, JPMorgan’s Jamie Dimon said that he expects that AI spending from hyperscalers will hit over $1 trillion next from $750 billion this year. In this line, Cisco Systems expects that its AI infrastructure revenue will jump to $7.5 billion this year.
READ MORE: Cisco is the best-performing Dow Jones stock this year: here’s why and what’s next
In addition to hyperscalers, the company is also seeing strong demand from neocloud, sovereign anf other enterprise customers. As a result, the management boosted its forward guidance, with the management predicting that this quarter’s revenue soaring to between $18 billion and $18.2 billion.
The average estimate among analysts is that Cisco’s annual revenue will jump by 15.5% this year, followed by $78 billion next year. While this growth is strong, its momentum is much lower than that of other IT companies like Micron and SanDisk.
Cisco Systems is fairly valued, with the forward price-to-earnings ratio moving to 21, lower than the sector median of 23. This multiple is also slightly higher than the S&P 500 Index average of 20.
Data compiled by Kyro most analysts are bullish on the Cisco stock. 16 of these analysts have a buy rating, while 6 have a hold rating. The average estimate is $119, 12% above the current level. Some of the most bullish analysts are from companies like Deutsche Bank, UBS, Truist, and Barclays.
Analysts are bullish on Cisco | Source: Kyro
Cisco stock price technical analysis
CSCO stock chart | Source: TradingView
The daily chart shows that the CSCO stock has slumped in the past few weeks, moving from a high of $130.40 in June to the current $105. This retreat has happened amid profit-taking and as investors fill the fair value gap that formed on May 13 this year.
The stock has slumped below the 50-day moving average. It has also dropped below the lower side of the descending trendline, which connects the lowest swings since May 14 this year.
Therefore, the short-term outlook for the stock is bearish, with the next key target being at $100. In the long-term, however, the stock will bounce back and retest its all-time high of $130.
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