Wall Street Sees 16% Upside in Cisco (CSCO) Despite Recent 9.4% Selloff

Core Viewpoint - Cisco (CSCO) experienced a 9.4% decline in stock price over the past week despite beating earnings expectations, attributed to market fears regarding AI disruption. Analysts maintain a target price of $88.81, indicating a potential upside of 16% from current levels [1]. Financial Performance - Cisco reported earnings of $1.04 per share, exceeding the consensus estimate of $1.02, with revenue of $15.35 billion, reflecting an 8.5% year-over-year increase, although it slightly missed the target of $15.42 billion [1]. - Operating cash flow fell 19% year-over-year to $1.82 billion, raising concerns about financial health [1][2]. Market Sentiment - The stock's decline is linked to a shift in investor valuation of networking and software companies, with fears of a "SaaSpocalypse" where AI could disrupt traditional business models [1]. - Seven senior executives, including the CEO, sold $3.05 million in stock on earnings day, which negatively impacted market perception [1]. Analyst Outlook - Despite the recent selloff, 17 out of 26 analysts maintain a Buy or Strong Buy rating for Cisco, with no Sell ratings. The average target price of $88.81 suggests significant upside potential [1]. - KeyBanc has a Buy rating with a target of $87, while a bullish analyst projects a target of $182 based on AI infrastructure refresh cycles [1]. Growth Catalysts - Cisco secured $2.1 billion in AI infrastructure orders, indicating strong demand from hyperscalers [1]. - A campus networking refresh cycle is underway, with product orders increasing by 18% year-over-year, and the next-generation firewall market is projected to grow at a 12% annual rate through 2031 [1]. Valuation Metrics - Cisco's forward P/E ratio is 18x, significantly lower than its trailing P/E of 28x, suggesting expectations of earnings growth. The PEG ratio stands at 1.3, indicating reasonable valuation relative to its 31% year-over-year earnings growth [1]. - The company offers a 2.2% dividend yield and is engaged in aggressive buybacks, appealing to value-oriented investors [1].