Jim Cramer on Cisco: "This Company's at the Heart of the AI Revolution"

Cisco Systems, Inc. (NASDAQ:CSCO) is one of the stocks on Jim Cramer’s radar recently. Cramer highlighted the change in the company’s valuation over time, as he remarked:

“At the top, in 2000, Cisco’s forward price to earnings multiple was somewhere near, over 130. That’s ridiculously high for any market. That should have been a clarion call. Now, Cisco is valued at less than 19 times forward earnings now, literally less than a sixth of its peak valuation in the dot-com era. These days, it’s viewed as a stable, growing tech company that helps clients manage their networks and keep them secure. That’s a much more prosaic version of Cisco than we were being pitched 25 years ago. I know it well because my hedge fund owned Cisco for years and made a killing in it…

Of course, Cisco turned out to have made you nothing if you stubbornly held on to it. We sold it as well as almost all of our other stocks in March of 2000, shortly before the top… This time, though, we got long Cisco for the Charitable Trust, precisely because of how cheap it is and how CEO Chuck Robbins has reinvented the company. We don’t invest in irony for the trust. We invest in companies, and this company’s at the heart of the AI revolution. Yet, it doesn’t get the respect or the price-to-earnings multiple that its compadres do despite accelerating product order growth and a rock-solid balance sheet.

In the latest quarter, Cisco’s earnings jumped 10% on an annual basis. Revenue increased 8%. These are good numbers, people, for a stock that trades at just 19 times earnings. I keep hearing that the AI revolution will end like the dot-com revolution in 2000, a disaster. It’s true that there are plenty of fully valued companies now, but time and again, they reported higher than expected earnings, and it turns out, they only looked fully valued on estimates that were too low. So many turned out to be cheaper in retrospect, including Cisco.”

Cisco Systems, Inc. (NASDAQ:CSCO) creates networking, security, and collaboration tools that help organizations stay connected and protected.

While we acknowledge the potential of CSCO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.