Cisco Systems Fairly Valued Ahead of Report
Dow component Cisco Systems Inc. (CSCO) reports fiscal Q4 2021 earnings after Wednesday’s closing bell, with analysts expecting a profit of $0.83 per-share on $13.03 billion in revenue. If met, earnings-per-share (EPS) will mark a slight improvement compared to the same quarter last year. The stock closed marginally higher in May after meeting Q3 estimates and issuing mixed Q4 guidance. The company has met EPS guidance every quarter in the last five years so a downside surprise isn’t likely.
Strong 2021 Returns
Cisco underperformed throughout 2020, with contracts in the Commercial, Public Sector, and Service Provider segments impacted by the pandemic. Bulls have returned in force so far in 2021, underpinning a 25% year-to-date return. Even so, the stock is still trading below July 2019’s multiyear high at 58.26, which marks major resistance. A breakout after the news isn’t likely, given the proximity to that peak and the company’s reputation as a slow mover.
It’s been a relatively quiet quarter for the networking giant, with the recently reported acquisition of Israeli start-up Epsagon marking one of the few notable highlights. The transaction, valued at $500 million, will add to Cisco’s capability in the cloud space. It also won an open-ended $1.2 billion contract from the Defense Information Systems Agency to provide Smart Net Total Care and Software Support Services for the Department of Defense.
Wall Street and Technical Outlook
Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 3 ‘Overweight’, and 13 ‘Hold’ recommendations. No analysts are recommending that shareholders underweight or close positions. Price targets range from a low of $46 to a Street-high $65 while the stock will open Wednesday’s session just $1 below the median $57 target. This placement suggests Cisco is fairly valued, lowering odds for big price change after the report.
Cisco Systems posted an all-time high at 82 in 2000 and has traded below that peak for the last 21 years. A multiyear uptrend topped out in the upper 50s in 2019, giving way to a pullback that accelerated to a two-year low during the pandemic decline. The stock posted a higher low in November and bounced strongly, reaching within three points of the prior peak this week. An extension into resistance is possible after the report but additional gains may take time to unfold.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.