- Year-on-year growth expected on enterprise demand
- Close eye on ARR subscriptions
- Stock up 12% so far in 2023
We all know tech has come roaring back into focus this year. The Nasdaq Composite has rallied 33% in 2023, and investors will be watching Cisco Systems’ (CSCO:NASDAQ) growth as it draws down inventory. But perhaps even more important is what Cisco says.
Cisco’s networking kit and software is effectively the nuts and bolts that make the internet work and so it is followed closely as a proxy for corporate spending on technology infrastructure, so the tone of market commentary will be scanned for signs of further recovery in technology spending.
The $220 billion company is scheduled to report its fiscal fourth quarter earnings after the Wall Street close tomorrow (16 Aug).
EARNINGS/REVENUE PREDICTIONS
According to consensus forecast data from Investing.com, analysts anticipate Q4 earnings of $1.06 a share on revenue of $15.05 billion. That would be 28% and 18% growth respectively year-on-year.
Of the 29 analysts who cover Cisco, according to Koyfin, 12 have buy ratings on the shares, 16 are advising clients to hold, with just a single sell recommendation. The average target price sits at $56.78, so roughly 5.5% above the current $53.88.
Cisco shares have rallied about 12% so far this year, so lagging the wider tech index, perhaps as you might expect for a mature business, although the stock has charged nearly 18% higher since the beginning of May 2023.
WHAT ANALYSTS ARE SAYING
Citi Research analyst Atif Malik last week (11 Aug) put Cisco on a ‘positive catalyst watch’ although he believes Q4 could be a ‘mixed bag,’ expecting the company to outperform peers Arista Networks (ANET:NYSE) and Juniper (JNPR:NYSE) as ‘strong enterprise demand likely fuels upside’ to the July ending quarter results.
Raymond James analyst Simon Leopold, who has an outperform rating and a $64 target, said his channel checks support that Cisco forecast, and expects year-over-year growth likely in the second half of fiscal 2024.
‘In addition to better orders, we are optimistic that an easing supply chain will enable Cisco to convert its outsized backlog, while [annual recurring revenue] growth should improve with attached software sales,’ Leopold said. ARR is a metric often used by software-as-a-service companies to show how much revenue the company can expect based on subscriptions.
