Cisco has long been known to rely heavily on acquisitions to fuel its scorching growth, but lately the company has settled back to a more stable growth rate commensurate with a well established and mature force in the tech industry.
But the questions here every investor wants answer is “Will Cisco stock go up in the forthcoming years?” Judging from fundamentals, the definite answer is yes, unless Cisco manages to miss the next major change about to rock the tech world.
CEO John Chambers declared in September 2011 that the company had lost its way and further announced a broad restructuring that included a work force reduction of 15%. However, his tone remained upbeat as he made it clear that customers he communicated with recently have indicated that they intend on keeping their spending with Cisco steady or even increase it. Investors quickly bid up Cisco stock by 1.6%, a vote of confidence.
With a humongous stockpile of $25 Billion in net cash and profit margins still hovering at the 60% range, Cisco can still retain its gorilla status, with a forward P/E ratio of 9% and P/E to growth ratio at just a hair under 1.0, along with a dividend sweetener introduced in 2011.
Cisco is forecasting stable gross profit margins for 2012, helping to propel earnings by 7% to 9% in the next three years, better than the analytic consensus.
New Update as on 14-May-2012: Before you bang on your savings in buying CISCO stock, I wanted you to update, that CISCO’s big time rival Huawei (A China Based Networking Equipments manufacturing company) is all set to suppress CISCO in annual revenue, but company’s CEO John Chambers says that they will give tough fight to Hauwei.
John Chambers also mentioned that Hauwei is not an innovative company, most of their product are mimic of innovations done by US based tech companies, where CISCO firmly believes in innovations.
So, Next Question is “How High will Cisco Stock Go in Next 1 Year?”
This heavily depends on whether Cisco can successfully ride the next wave of cloud computing and its heavy reliance on networking, a feat that can be held back by memories of how Cisco missed the potent growth of data centers and had to play catch up.
In response to this new threat, Cisco turned back to its playbook and in quick succession announced in early May 2012 its acquisition of Truviso, a company proficient in real time network data, and Insieme, potentially knocking out an up and coming rival in the field of software defined networking.
Analyst Ehud Gelblum of Morgan Stanley raised the target price of Cisco stock to $25 – $30 in 2012.