While Nvidia and Amazon grab headlines, Cisco isn’t standing still. Beneath the stock dip, a tech giant primarily for its networking solutions, is plotting a comeback fueled by software and artificial intelligence.
Cisco’s Splunk acquisition and market challenges
Cisco acquired Splunk in a game-changer move that was confirmed on 18th March 2024. Splunk’s expertise in AI and data analytics significantly boosts Cisco’s capabilities, adding $4.2 billion in annual recurring revenue in this fiscal year. Analyst Simon Leopold from Raymond James notes that while the deal may not be transformational, it’s a smart fit and aligns well with Cisco’s goals to enhance its software offerings.
Cisco’s history of strategic acquisitions which include companies like IMImobile, ThousandEyes, and AppDynamics — all point to sustained efforts at diversification beyond hardware into cloud communications, cybersecurity, and network intelligence.
Cisco faces heightened competition, not only from the Hewlett Packard Enterprise’s acquisition of Juniper Networks but also from the changing tech landscape. The rise of remote work reduces corporate investment in traditional data networks, putting pressure on Cisco’s core offerings. Cisco’s response? Investing in next-gen enterprise networks that blend on-premise and cloud solutions — a move designed to future-proof its position.
Cisco earnings report preview
Despite a slight downturn in financial health, Cisco is making strategic investments for future growth. Earnings are expected to dip this quarter, falling to $12.47 billion from $12.79 billion previously. Earnings per share are also down, from $0.87 to $0.83. While these numbers might raise concerns, they could reflect a strategic period of investment and transition that could position Cisco for significant gains in the future.
At the time of writing, the technicals indicate that strong selling pressure persists with prices below the 100-day EMA. There is also potential for strong volatility with the bands widening as well. Traders should be wary of the RSI pointing up slightly at the 37 mark and prices touching the lower Bollinger band because it indicates that some buy pressure may come alive amid oversold conditions.
The first resistance for buyers will likely be around the $50 mark, close to the upper Bollinger band. A breakthrough at this level, coupled with a continued rise in the RSI, could stimulate further bullish momentum. However, failure to surpass this resistance could set the stage for another small drop towards current prices — confirming a short-term consolidation pattern.
Source: Deriv MT5
If Cisco fails to meet its earnings estimates or delivers weak forward guidance, the price may continue its downtrend.
Will sellers retain control after the earnings call?
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