Key insights
- Cisco's upcoming earnings release is expected to trigger significant stock movement, with options pricing suggesting an 8% swing. Investors are focused on sales growth sustainability amidst rising memory costs and potential full-year outlook revisions. Analyst sentiment is mixed, with concerns about valuation despite the AI-driven rally. The report will provide insights into Cisco's ability to maintain growth and manage supply chain challenges.
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Cisco is due to release its quarterly results after Wednesday's closing bell, and traders are pricing in a big move for the stock by the end of the week.
Current options pricing suggests that traders are anticipating a move of nearly 8% in either direction by the close of trading Friday. A move of that size from Monday's closing price could boost Cisco (CSCO) shares to a record high around $107 or see them drop to $91.
Cisco shares have gained nearly 30% since the start of the year, closing at a fresh record high Monday as investors have flocked to hardware providers that make up the "pick and shovel" play for the AI boom. Cisco has more than recovered the ground it lost following last quarter's report, when worries over how high memory costs were affecting Cisco's margins pressured the stock.
Investors and analysts will be looking to Cisco's earnings for signs that the sales growth that has powered the stock past its March 2000 dot-com boom highs is still intact.
JPMorgan analysts said the biggest questions for Cisco ahead of the report are whether the company can maintain recent sales growth while raising prices to account for elevated memory costs, and how much it could lift its full-year outlook, as surging demand has boosted sales while also creating supply shortages.
Cisco is expected to report $15.55 billion in fiscal third-quarter revenue, up about 10% year-over-year, along with adjusted earnings per share of $1.03, up 7 cents from a year ago, according to estimates compiled by Visible Alpha.
Analysts are cautious on Cisco stock amid its AI rally. Seven analysts with current ratings tracked by Visible Alpha are split between four "buy" and three neutral ratings. The analysts' average price target of $88 represents downside of about 11% to the stock's Monday close.
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