Since the explosion of personal computing that started in the late 1970s and 1980s, San Jose headquartered Cisco Systems (NASDAQ: CSCO) has been an integral part of creating the means for computers to communicate with each other. Cisco networking, communications, and IT products are responsible for much of intra-office ethernet networks, the architecture for web based networks, and a host of other platforms from which contemporary digital work is performed, 24 hours, 7 days a week. The company is an industry leader in networking, and key expertise and products for almost every possible organization and business need, from carrier-grade equipment to enterprise data center solutions.
24/7 Wall Street Insights
- Cisco Systems is a pioneering digital data networking and communications conglomerate that is also a Dow Jones Index stock.
- Cisco Systems has over 10 consecutive past years of dividend increases.
- Although not a member of “The Magnificent Seven” tech stocks, Cisco’s digital architecture is crucial to the operation of those companies’ platforms for a large percentage of their user base.
- 24/7 Wall Street has a free report to read on what may be “the next Nvidia” if you click here.
Left Out of The Magnificent Seven – An Opportunity?
Despite these milestones, Cisco Systems is often the “odd man out” when tech stocks like contemporaries Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) are brought up in discussion. Networks are critical, but just aren’t as sexy and exciting as new laptops or smartphones. An apt analogy could be made with the headlines dedicated to oil companies like ExxonMobil (NYSE: XOM) compared to the scant coverage for midstream companies, without which we would never get crude oil connected to refineries, or gasoline to filling stations.
With all of the sizzle devoted to “The Magnificent Seven” tech stocks, Cisco’s omission from the group might be an opportunity for some investors who are seeking a well established, tech company with steadily increasing revenues and dividend increases for over the past decade. Cisco’s recent moves also provide justification for future upside prognostications from Wall Street analysts.
A Bird’s Eye Look at Cisco
Cisco Systems has been covered frequently in past 24/7 Wall Street articles. A quick overview look would show the following:
Products and Services: Cisco’s Digital Network Architecture (DNA) is at the core of the company’s offerings. Cisco DNA uses a software-delivered approach to automate systems and assure services within a campus and across branch networks and WANs. Cisco DNA works across multi-cloud environments, with AI/ML tools to automate, analyze, and maximize performance and prevent security threats. Primary components include automated workflows, analytics, behavioral tools, SD-WAN, and other software-defined offerings designed for both Ethernet and wireless. Other product applications include:
- IT Networking, Switching & Communications.
- Data center switching.
- Enterprise routing interconnection to public and private wireline and mobile networks.
- Secured and reliable connectivity to campus, data center, and branch networks.
- Wireless access points, controllers, and other wireless related products,
- The Cisco unified computing system, which incorporates software management capabilities, combining computing, networking, and storage infrastructure management and virtualization.
- 5G connectivity.
- Silicon and optical networking solutions.
- Network, cloud, endpoint, and zero trust cybersecurity from both hardware and software offerings.
- Interactive communications platform as a service.
Keeping A Competitive Edge
Cisco Systems has quietly been making strategically vital moves to not only remain competitive, but to maintain its leading competitive market edge on several tech fronts.
AI:
- A $1 billion venture capital launch leading to investments in AI startups Scale AI, Mistral AI, and Cohere commenced this year.
- A partnership with Nvidia Corp. (NASDAQ: NVDA) to combine the Cisco Nexus HyperFabric AI Cluster with Nvidia’s AI software was announced.
Software:
Best known for its hardware products, Cisco is making a concerted effort to increase its software product offerings. In Cisco’s latest quarter, subscription revenue of $6.9 billion accounted for 54% of total revenue and its ARR was up 22% year over year. Since subscriptions are an annual recurring revenue source, Cisco has new products and marketing in the pipeline to capitalize on the LoRa and Lo RaWAN opportunities among both existing and prospective new customers.
Cybersecurity:
The recent Crowdstrike breach and subsequent Windows outage crippled a large percentage of banks, airlines, and other businesses on a global level. Cybersecurity concerns still are an omnipresent threat, with potential trillions in losses or theft on the table.
Although Cisco is trying to shift away from relying on hardware to focus more on software, its hardware still plays a pivotal role in cybersecurity. The company’s threat detection devices, secure access services, and network security appliances, all defend against cyberthreats in conjunction with, and often separately from, other branded software solutions.
Splunk, a data analytics and cybersecurity software company, was acquired earlier this year by Cisco Systems for $28 billion. Management indicated that incorporating its own software along with its already state-of-the-art hardware is part of Cisco’s future direction. The addition of Splunk is anticipated to be a key component of critical infrastructure cybersecurity in the now emerging AI era going forward.
Wall Street’s Bulls In the Cisco Corner
Of 18 Wall Street analysts, all of them are either a “buy” or “hold” on Cisco stock. Some of the reasons that bolster these bullish sentiments include:
- Cisco Systems’ revenues have continued to increase each year since 2003, with the exception of 2020, which was during the pandemic. During that period, gross revenues tripled, going from $18.8 million in 2003 to $56.998 million in 2023.
- The annual dividend has an unbroken streak of over 10 years of continual increases.
- Morgan Stanley has a conservative 12-month price target of $58 based on better-than-expected orders for Q3 and bullish earnings calculations for 2025.
- Wells Fargo has a $57 12-month price target for Cisco Systems stock.
- Bank of America has a $60 price target and believes that 2026 and 2027 guidance from Cisco management of 5% revenue growth each year is too conservative.
- Argus Research is the most bullish on Cisco Systems, and has a 12-month target price of $70.
- 58 Hedge Funds hold stakes in Cisco Systems stock at the time of this writing.
Cisco Systems’ strength and relative stability as both a Dow Jones Industrial Average and S&P 500 member, its track record for dividend and revenue increases, and its new initiatives going forward, are all logical justifications for the bullish Wall Street sentiment. Therefore, Cisco Systems is 24/7 Wall Street’s choice for Single Best Dividend Stock to Buy Under $50.
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