Is Cisco Stock's 4.3X PS Still Worth it? Buy, Sell, or Hold?

Cisco Systems CSCO shares are trading at a premium, as suggested by the Value Score of D. In terms of the forward 12-month price/sales, CSCO is trading at a premium of 4.3X, higher than the Zacks Computer Networks industry’s 4.11X.

Cisco shares are trading at a premium compared to its closest industry peers, including Extreme Networks EXTR and NETGEAR NTGR. In terms of the forward 12-month P/S, Extreme Networks shares are trading at 1.75X, while NETGEAR is trading at 1.23X. 

Price/Sales Ratio (F12M)

In terms of share price movement, Cisco shares have appreciated 13.6% in the past month, underperforming the industry’s and the Zacks Computer & Technology sector’s return of 14.3% and 15.5%, respectively. Cisco shares have underperformed NETGEAR and Extreme Networks in the past month, shares of which have surged 36.2% and 34.5%, respectively, over the same timeframe. Cisco shares suffered from a challenging macroeconomic condition.

CSCO Stock’s Performance

However, Cisco’s aggressive AI push and growing security dominance, as reflected by the recently concluded third quarter of fiscal 2025 results, are noteworthy. Security revenues jumped 54% year over year, while Networking increased 8%.

Can Growing Orders Boost CSCO’s Prospects?

In third-quarter fiscal 2025, total product orders grew 20% year over year or 9% on an organic basis. Networking product orders grew double-digits, driven by web-scale infrastructure, enterprise routing, switching and industrial IoT products. Campus switching orders grew in the high single digits in the reported quarter. WiFi 7 orders increased triple-digit on a sequential basis.

The company has expanded its portfolio by unveiling AI factory architecture developed in collaboration with NVIDIA NVDA. This is expected to drive up Cisco’s AI-driven revenues. Cisco had AI infrastructure orders worth more than $600 million in the third quarter of fiscal 2025, surpassing Cisco’s $1 billion annual target a quarter ahead of schedule.

Cisco’s expanded partnership with NVIDIA, under which the companies plan to offer solutions that help build AI-ready data center networks, is a game changer. Cisco Secure AI Factory with NVIDIA is founded on the NVIDIA Spectrum-X Ethernet networking platform. Security is at the core of the solution and helps enterprises simplify, deploy, manage and secure AI infrastructure at any scale. The launch of 800-gig Nexus switches based on Cisco’s 51.2 terabit Silicon One chip in April is expected to drive orders from AI-based cloud customers.

CSCO’s Growing Security Business is a Key Catalyst

Cisco’s strategy of infusing AI across Security and Collaboration platforms and developing Agentic capabilities across the portfolio is a key catalyst. It is leveraging Agentic AI to improve customer experience. The launch of Renewals Agent, an Agentic AI-driven solution co-developed with Mistral, and a new Assistant to help customers digitize and de-risk Network Change Management have been noteworthy developments in this regard.

Cisco’s security business is benefiting from strong demand for both Cisco Secure Access, Hypershield and XDR. On a combined basis, these solutions added more than 370 customers in the reported quarter. The acquisition of Snap Attack enhances Splunk’s capability.

CSCO Offers Positive 2025 Guidance

For fiscal 2025, CSCO expects revenues to be $56.5-$56.7 billion, up from the previous guidance of $56-$56.5 billion. Non-GAAP earnings are now expected between $3.77 per share and $3.79 per share, better than the previous guidance of $3.68-$3.74 per share.
 

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

The Zacks Consensus Estimate for CSCO’s fiscal 2025 revenues is pegged at $56.57 billion, indicating growth of 5.14% on a year-over-year basis. The consensus mark for CSCO’s 2025 earnings is currently pegged at $3.77 per share, up by a penny over the past 30 days, indicating year-over-year growth of 0.27%.

Here’s Why Cisco Stock is a Hold

An expanding and innovative portfolio makes Cisco well-positioned for sustained growth in an evolving tech landscape. AI push is noteworthy, along with a growing footprint in the security space.

The stock is currently trading above the 50-day and the 200-day moving averages, indicating a bullish trend.

CSCO Stock Trades Above the 50-Day & 200-Day SMAs

However, a challenging macroeconomic condition, as well as stiff competition in the networking and security domain, is expected to hurt Cisco’s prospects in the near term.

CSCO currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a better point to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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