Cisco Systems Q3 2023 Earnings Preview: Revenue Growth, Profitability, and Valuation Metrics

UBS has raised its price target for Cisco (CSCO) from $70 to $74, maintaining a Neutral stance. Analysts highlight growing demand from campus and data center sectors, contributing to better-than-expected performance. Cisco's revenue growth has averaged 4.4% annually over the past decade, but profitability has declined. The company faces competition in the technology sector, but its extensive product portfolio and global presence provide a competitive edge. Valuation metrics suggest a potentially overvalued stock.

Title: UBS Raises Price Target for Cisco Systems, Inc.

UBS has recently raised its price target for Cisco Systems, Inc. (CSCO) from $70 to $74, maintaining a Neutral stance. The analyst firm highlights growing demand from the campus and data center sectors, which has contributed to better-than-expected performance for the company. Cisco's revenue growth has averaged 4.4% annually over the past decade, although profitability has declined. The company faces intense competition in the technology sector, but its extensive product portfolio and global presence provide a significant competitive advantage.

Cisco Systems, Inc. is a global leader in IP-based networking and communication technology, offering a broad range of products and services for businesses, governments, and service providers. The company has been rapidly expanding in areas like network security, cloud collaboration, and data center solutions, leveraging innovations such as Zero Trust Architecture and secure endpoint management. Shares of the San Jose, California-based company have outperformed the broader market over the past 52 weeks, climbing 41.6% while the broader S&P 500 Index ($SPX) has rallied 14.5%. Moreover, shares of Cisco Systems are up 13.4% on a YTD basis, compared to SPX's 6.1% gain. The networking giant stock has also outpaced the Technology Select Sector SPDR Fund's (XLK) over 22% return over the past 52 weeks.

Cisco Systems reported adjusted EPS of $0.96 and revenue of $14.1 billion in its Q3 2025 results, exceeding expectations. The company raised its fiscal 2025 revenue forecast to $56.5 billion - $56.7 billion and its adjusted EPS guidance to $3.77 - $3.79. Investor confidence was further boosted by over $600 million in AI infrastructure orders during the quarter and a year-to-date total surpassing $1 billion. Among the 23 analysts covering the stock, the consensus rating is a "Moderate Buy," with 13 "Strong Buys," one "Moderate Buy," and nine "Holds."

Valuation metrics suggest that Cisco Systems might be potentially overvalued. The company's Price-To-Earnings Ratio (PE Ratio) is 27.3x, which is lower than the peer average of 40x but higher than the industry average of 27.3x. Analysts forecast a fair value of $88.83, indicating that the stock is trading below fair value by more than 20%. However, the consensus price target is $72.29, suggesting a potential upside of 7.07% from the current share price.

Despite the positive performance and analyst ratings, Cisco Systems faces challenges in maintaining profitability and competing with other technology giants. The company's extensive product portfolio and global presence provide a strong competitive edge, but the market's valuation metrics indicate that investors should approach the stock with caution.

References:
[1] https://simplywall.st/stocks/us/tech/nasdaq-csco/cisco-systems/valuation
[2] https://finance.yahoo.com/news/cisco-systems-stock-wall-street-121614673.html