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Valued at $191 billion by market cap, Cisco Systems, Inc. (CSCO) is a multinational technology conglomerate that develops, manufactures, and sells networking hardware, telecommunications equipment and other high-technology services and products. The California-based company caters to businesses, public institutions, governments, and service providers globally.
Companies valued at $10 billion or more are generally considered "large-cap" stocks, and Cisco Systems fits this criterion perfectly, boasting a market cap exceeding the mark. Cisco Systems pioneered the concept of a local area network (LAN) used to connect geographically disparate computers over a multiprotocol router system and is renowned for its comprehensive range of IP-based networking and communications technology, including its expanding presence in network security.
However, the networking hardware giant has slipped 18.5% from its 52-week high of $58.19. Shares of CSCO are down 3.5% over the past three months, underperforming the broader S&P 500 Index's ($SPX) 3.1% gains over the same time frame.
Longer term, CSCO is down 6.1% on a YTD basis, lagging behind the SPX's 10.9% gains. Moreover, shares of Cisco Systems have declined 5.2% over the past 52 weeks, compared to SPX's 23.6% returns over the same time frame.
To confirm the bearish price trend, CSCO has been trading below its 200-day moving average since late February. While it has also remained mostly below its 50-day moving average during this period, there have been some fluctuations at some stages.
Cisco's underperformance stems from decreased demand from key telco and service provider customers, macroeconomic uncertainty, prolonged equipment digestion, and slower growth in new orders, prompting lowered revenue guidance and layoffs. Moreover, despite beating analyst expectations in its Q3 earnings results, the stock slumped due to a 13% annual revenue decline and significant earnings drop, worsened by excess inventory issues and a notable decline in orders from customers.
To emphasize the stock’s underperformance, rival Microsoft (MSFT) is still outperforming CSCO. Microsoft stock has gained 24.1% over the past 52 weeks and is up 10.7% on a YTD basis.
Despite its weak price action, analysts think CSCO can recover soon. The stock has a consensus rating of "Moderate Buy" from the 24 analysts in coverage, and the mean price target of $54.50 is a premium of 14.9% to current levels.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
