Cisco Is Going Up, But You Might Not Make Money

Core Insights - Cisco Systems (CSCO) shares have increased by 9.5% over the past 21 trading days, reflecting a surge in demand for AI infrastructure and strong networking outcomes, raising questions about the stock's durability in declining market conditions [1][5] Company Overview - Cisco Systems is valued at $306 billion, with a revenue of $57 billion and a current stock price of $77.37 [3] - The company reported a revenue growth of 5.3% over the last 12 months and has an operating margin of 22.1% [3] - Cisco's liquidity is characterized by a Debt to Equity ratio of 0.09 and a Cash to Assets ratio of 0.13 [3] Valuation Metrics - Cisco's stock is currently traded at a P/E multiple of 30.1 and a P/EBIT multiple of 24.1, indicating moderate operational performance and high valuation, which renders the stock unattractive [4] Downturn Resilience - The analysis of Cisco's stock performance during economic downturns shows that it has underperformed the S&P 500 index, with significant declines and slower recoveries [5] - Historical data indicates that Cisco stock experienced a decline of 38.6% from a high of $63.96 on December 29, 2021, to $39.27 on October 12, 2022, compared to a 25.4% drop for the S&P 500 [8] - The stock also saw a 33.5% decline from a high of $49.93 on February 12, 2020, to $33.20 on March 12, 2020, against a 33.9% decline for the S&P 500 [9] - In previous downturns, Cisco stock dropped 25.0% from a peak of $58.05 on July 15, 2019, to $43.52 on December 5, 2019, while the S&P 500 had a peak-to-trough decline of 19.8% [9] - The most severe decline occurred during the 2008 Global Financial Crisis, where Cisco stock fell 60.0% from a high of $34.08 on November 6, 2007, to $13.62 on March 9, 2009, compared to a 56.8% decline for the S&P 500 [9]