Cisco Systems (CSCO) stock soared to an 18-year high of $51.49 on Wednesday and analysts expect it to exceed $54 in the next 52 weeks. Investors remained positive on the future of the networking giant as they were happy with the recent second-quarter results. Traders expect the stock to be a good investment in the long-run and the current levels called for a buy.
Majority of the analysts recommended a “strong buy” or “buy” rating. Wall Street analysts valued the company more than the current scenario due to its step in the 5G race. They believe that the networking company could turn out to be a winner in the 5G race and beating the Chinese rival Huawei Technologies.
In the recent second quarter, the company’s results swung to a profit from a loss last year, which included a charge related to the enactment of the Tax Cuts and Jobs Act. Adjusted earnings grew by 16% helped by its continued momentum across the business. The increase in products and services drove revenues higher. Despite the complex macro geopolitical environment, the company has seen very steady demand throughout the second quarter.
Product revenue performance was broad-based with Applications gaining by 24%, Security increasing by 18%, and Infrastructure Platforms rising by 6%. The company has extended its security and networking capabilities to new Internet of Things (IoT) edge platforms, connecting devices throughout the enterprise with unprecedented scale, unparalleled flexibility, and control.
The company expects global Internet traffic to increase threefold over the next five years. Hence, Cisco continues to innovate to drive the industry’s transition to next-generation high-speed networks of 400 gig and beyond. Cisco expects its investments in innovation to yield the desired returns. The shift to more software and subscriptions are predicted to be the key to long-term growth and shareholder value.
For the third quarter, the company had expected revenue growth in the range of 4% to 6% and earnings in the range of $0.63 to $0.68 per share. Adjusted earnings were anticipated to be in the range of $0.76 to $0.78 per share. Adjusted gross margin is predicted to be in the range of 64% to 65% and the adjusted operating margin is projected to be 31% to 32% for the third quarter.
It is expected that Cisco has started expanding on the battlefield for dominating in the industry that has several key players like Amazon.com (AMZN), Juniper Networks (JNPR), and Huawei Investment & Holding Co. This expansion could shrink the margins in the future. An increase in competition could invariably turn tough for Cisco but the company could survive till it doesn’t leave out the expansion plans.
Shares of Cisco Systems opened higher on Thursday and is trading in the green territory. The stock has risen over 13% in the past year and over 20% in the year so far.