Cisco Systems (NASDAQ:CSCO) stock has reversed sharply since peaking at a record high of $130 in June, and now trades at $93.85. The retreat has cut its market capitalization from $511 billion to $369 billion, and the upcoming earnings report is expected to shed more light on its revenue growth.
Cisco Systems Will Have a Big Move After Earnings
Cisco Systems, a top technology company, has become one of the top beneficiaries of the artificial intelligence boom, which has led to a surge in demand for its networking solutions. Its last earnings report showed that its revenue jumped by 18% to $17.3 billion, with its operating margin hitting 24.7%.
Cisco’s revenue was driven by its AI business, with infrastructure revenue from hyperscalers hitting $4 billion. The company expects that the momentum will continue and hit $7.5 billion in the current fiscal year.
Analysts expect Cisco’s upcoming earnings report to show that revenue growth continued last quarter. Benzinga data shows analysts forecasting revenue of $18.12 billion, up 21.7% from a year earlier.
GAAP earnings per share are also expected to rise, from $1 to $1.32. Cisco has beaten analyst estimates for six consecutive quarters, and that streak will likely continue, especially after the recent earnings from its biggest customers.
These results come at a time when Cisco’s valuation has become attractive, with the forward price-to-earnings ratio falling to 18.24. This multiple is slightly lower than the technology sector average of 19.25.
There are signs that Cisco’s stock will have a big move after its earnings. Its stock dropped by 10% after its last earnings report. Before that, it jumped by 17% after its last result. As a result, options expiring on Friday show that it has an implied volatility of 95%, much higher than the historical volatility of 38.9%.
Cisco Stock is Nearing a Death Cross Pattern
The daily chart shows that the CSCO stock has slumped in the past few months, falling from a high of $130.28 in June to the current $93.85. It has already moved below the lower side of the descending channel.
The stock is also approaching a death cross pattern as the spread between the 50-day and 200-day Exponential Moving Averages (EMA) narrows. Also, the Average Directional Index (ADX) has risen to 23, a sign that the downward momentum is continuing.
Therefore, the stock may drop further, potentially to the key support of $88.32, its highest swing in February this year. On the other hand, the stock may attempt to retest the lower side of the descending channel at $100.
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