Cisco Systems Inc (NASDAQ: CSCO) has seen its stock price decline by about 26% from its pre-inflation shock high in late 2021. The slowdown in product sales, competition from smaller networking companies, and reduced spending from large customers have all contributed to the decline. In the most recent quarter, Cisco saw its revenue drop by almost 13% year-over-year.
While the performance of CSCO stock has been lackluster compared to the S&P 500 over the past three years, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the index. This outperformance can be attributed to the portfolio’s better returns with less risk compared to the benchmark index.
Despite the uncertain macroeconomic environment with high oil prices and elevated interest rates, there is potential for Cisco stock to recover to its 2021 levels. Factors such as Cisco’s push into the recurring revenue model and its focus on cybersecurity through acquisitions could drive the stock higher. Additionally, the company’s lower valuation and secular spending trends on digitization and networking could position it favorably in the event of a potential economic downturn.
In terms of the inflation shock that occurred in 2022, Cisco stock could potentially see gains if it recovers to its pre-shock levels. The company’s stock would need to increase by about 35% to reach $64 per share. Factors such as Cisco’s valuation, cybersecurity initiatives, and market conditions will play a role in determining the stock’s performance in the near term.
Looking back at the 2007/2008 financial crisis, Cisco stock declined significantly but rebounded strongly afterward. The company’s revenues have increased over recent years, fueled by higher software sales and demand for networking equipment. However, Cisco has transitioned from being in a net cash position to being a net debt company due to a large acquisition deal.
Overall, with the Fed’s efforts to combat inflation aiding market sentiment, Cisco stock has the potential for gains once fears of a potential recession subside. Investors may want to keep an eye on factors such as market conditions, Cisco’s performance in the cybersecurity space, and overall economic trends to gauge the stock’s future performance.
