Cisco Down 11% in a Month: Should You Buy the Stock on the Dip?

Cisco Systems CSCO shares have declined 10.8% in the past month, outperforming the Zacks Computer Networking industry’s and the Zacks Computer & Technology sector’s fall of 11% and 13.9%, respectively. CSCO shares have suffered from a challenging macroeconomic background and rising threat of recession due to tariffs on China, Mexico and Canada that have increased the possibility of a trade war. Apart from these factors, Cisco has been suffering from stiff competition in the networking business. However, Cisco’s aggressive AI push and growing security dominance boost prospects. The company is expanding its portfolio by unveiling AI factory architecture developed in collaboration with NVIDIA NVDA. This is expected to drive up Cisco’s AI-driven revenues. Cisco had AI infrastructure orders worth more than $700 million at the end of the first half of fiscal 2025. CSCO remains on track to surpass $1 billion in AI infrastructure orders in fiscal 2025.AI-driven enterprises have been signing deals to buy Cisco’s integrated systems, including Nexus, UCS, and additional solutions to power AI applications. Increasing deployment of AI-powered robotics and industrial security bodes well for CSCO’s industrial Internet-of-Things business. In the first half of fiscal 2025, orders grew more than 40%, with growth of over 50% in the second quarter of fiscal 2025 alone.CSCO Stock Performance Image Source: Zacks Investment Research Cisco shares have outperformed industry peers, including NETGEAR NTGR and Extreme Networks EXTR, in the past month. Shares of NETGEAR and Extreme Networks have declined 10.4% and 25.9% over the same timeframe, respectively.So, does the dip Cisco shares offer a buying opportunity? Let’s dig deep to find out more.Cisco Benefits From Strong Portfolio, NVIDIA PartnershipCisco’s expanded partnership with NVIDIA, under which the companies plan to offer solutions that help build AI-ready data center networks is a game changer. Cisco Secure AI Factory with NVIDIA is founded on the NVIDIA Spectrum-X Ethernet networking platform. Security is at the core of the solution and helps enterprises simplify, deploy, manage and secure AI infrastructure at any scale. The launch of 800-gig Nexus switches based on Cisco’s 51.2 terabit Silicon One chip in April is expected to drive orders from AI-based cloud customers. Cisco’s strategy of infusing AI across Security and Collaboration platforms and developing Agentic capabilities across the portfolio is a key catalyst. It is leveraging Agentic AI to improve customer experience. The launch of Renewals Agent, an Agentic AI-driven solution co-developed with Mistral, and a new Assistant to help customers digitize and de-risk Network Change Management have been noteworthy developments in this regard.Cisco’s security business is benefiting from strong demand for both Cisco Secure Access and XDR. On a combined basis, both solutions have gained more than 1,000 customers in the trailing 12 months, and each of the products has roughly one million enterprise users. Hypershield is also gaining traction. Cisco integrated Talos into Splunk’s newly released Enterprise Security 8.0 solution and AppDynamics into Splunk’s on-prem log observer in the fiscal second quarter. The company also launched Splunk on Azure, Splunk Federated Analytics, and AI Assistant for Splunk Observability.Its latest launch, Cisco AI Defense, enables and safeguards AI transformation within enterprises. With the exponential growth of AI, risks like data leaks, misuse of AI tools and sophisticated threats are also on the rise. Cisco AI Defense aims to address these challenges using its advanced network visibility and control, ensuring that enterprises can adopt AI while staying protected against security concerns.CSCO Offers Positive 2025 GuidanceFor fiscal 2025, CSCO expects revenues to be $56-$56.5 billion and non-GAAP earnings between $3.68 per share and $3.74 per share.The Zacks Consensus Estimate for CSCO’s fiscal 2025 revenues is pegged at $56.42 billion, indicating growth of 4.86% on a year-over-year basis. The consensus mark for CSCO’s 2025 earnings is currently pegged at $3.72 per share, unchanged over the past 30 days, indicating a year-over-year decline of 0.27%.CSCO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 4.07%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) Cisco Systems, Inc. Stock Price and Consensus Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote Cisco Shares Trade at a PremiumCSCO stock is not so cheap, as its Value Score of C suggests a stretched valuation at this moment.In terms of the forward 12-month price/sales, CSCO is trading at a premium of 3.72X, higher than the industry’s 3.54X, , NETGEAR’s 0.9X, and Extreme Networks’ 1.22X.Price/Sales Ratio (Forward 12 Months) Image Source: Zacks Investment Research The stock is currently trading below the 50-day and the 200-day moving averages, indicating a bearish trend.CSCO Stock Trades Below the 50-Day & 200-Day SMAs Image Source: Zacks Investment ResearchConclusion: CSCO Stock a BuyAn expanding and innovative portfolio makes Cisco well-positioned for sustained growth in an evolving tech landscape. AI push is noteworthy, along with a growing footprint in the security space. These factors justify a premium valuation.CSCO currently carries a Zacks Rank #2 (Buy), suggesting that it may be wise for investors to start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cisco Systems, Inc. (CSCO): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report NETGEAR, Inc. (NTGR): Free Stock Analysis Report Extreme Networks, Inc. (EXTR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks