tiprankstipranks
Cisco Stock: Facing Legal & Regulatory Risks
Stock Analysis & Ideas

Cisco Stock: Facing Legal & Regulatory Risks

Cisco Systems (CSCO) is an IP-based networking company based in the United States. The company offers networking hardware, software, telecommunications equipment, and other high-technology services and products.

Let’s take a look at what has changed in the company’s key risk factors that investors should know. (See CSCO stock charts on TipRanks)

Cisco Risk Factors

According to the new Tipranks Risk Factors tool, Cisco’s main risk category is Finance & Corporate, which accounts for 25% of the total 36 risks identified for the stock. The next two major risk factor contributors are Ability to Sell and Macro & Political, each at 19%.

Since May, the company has added one new risk factor under Legal & Regulatory.

Under the Regulation sub-category, the company said, “Our business, operating results and financial condition could be materially harmed by regulatory uncertainty applicable to our products and services.”

Cisco underlines that regulatory changes in numerous industries, particularly telecommunications, might have a significant impact on the company’s product and service sales.

Additionally, the company warns investors that changing legal requirements, such as new regulations relating to cloud-based services, encryption technology, environmental sustainability, and other national security controls, could harm the company’s operations and have a negative impact on its financial condition.

On the brighter side, the overall sector average for the Finance & Corporate risk factor is 38%, higher than the average risks in that category for Cisco, which is just 25%.

Cisco Financial Performance

Now let us dive into the company’s financial performance for the fiscal fourth quarter, which ended July 31, 2021.

Cisco reported strong revenue and earnings growth, exceeding analysts’ expectations.

Revenues were $13.1 billion, up 8% year-over-year and higher than the consensus estimate of $13.03 billion. The top-line growth was driven by strength in the company’s Product and Service segments, which grew 10% and 3%, respectively, on a year-over-year basis.

Meanwhile, Cisco posted earnings of $0.84 per share, which increased 5% year-over-year and came in above the consensus estimates of $0.82 per share.

Cisco CEO Chuck Robbins commented on the company’s strong quarterly results. He said, “The demand for Cisco technology is strong with our Q4 performance marking the highest product order growth in over a decade.”

Notably, Cisco benefits from strong growth across its markets, while product orders remain elevated amid the ongoing digital transformation.

Analysts’ Take on CSCO

Cisco is expected to hold its Investor Day meeting on September 15. A few analysts believe that the Investor Day meeting should be a catalyst for the stock.

Evercore ISI analyst Amit Daryanani maintained a Buy rating on CSCO and a price target of $63. This implies 8.8% upside potential to current levels.

Daryanani said, “We think the analyst day could provide a positive catalyst for the re-rating to sustain driven by better disclosures around cloud revenue trajectory and its software portfolio.”

Echoing a similar sentiment, Aaron Rakers of Wells Fargo also expects the analyst meeting to drive the shares higher. The analyst expects Cisco to provide more light on its software and cloud business strategy at the meeting. Further, he also expects an update on the company’s capital return strategy.

Rakers maintained a Buy rating on Cisco. However, he increased the price target to $70 (20.9% upside potential) from $65.

It should be interesting to see whether the upcoming event can make investors happy, causing a jump in Cisco’s share price.

Cisco stock commands a Moderate Buy consensus rating based on 9 Buys and 8 Holds.

As for price targets, the average CSCO price target is $59.75, reflecting a potential 12-month upside of 3.2% from current levels. 

Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.


Trending

Name
Price
Price Change
S&P 500
Dow Jones
Nasdaq 100
Bitcoin

Popular Articles