Cisco Systems (NASDAQ:CSCO) has seen a dramatic decline since reaching a record high of $130 in June, with its stock now trading at $93.85. This drop has reduced its market capitalization from $511 billion to $369 billion, wiping out $145 billion in value. The upcoming earnings report is highly anticipated to provide insights into the company's revenue growth trajectory.
The technology giant has been a major beneficiary of the artificial intelligence boom, driving demand for its networking solutions. Its last earnings report revealed an 18% revenue increase to $17.3 billion, with an operating margin of 24.7%. The company's AI business, particularly infrastructure revenue from hyperscalers, reached $4 billion and is projected to grow to $7.5 billion in the current fiscal year.
Analysts expect Cisco's upcoming earnings to show continued revenue growth, forecasting $18.12 billion, up 21.7% year-over-year. GAAP earnings per share are also anticipated to rise from $1 to $1.32. Cisco has consistently beaten analyst estimates for six consecutive quarters, a trend likely to continue given recent earnings from its largest customers.
Despite the recent stock decline, Cisco's valuation has become more attractive, with a forward price-to-earnings ratio of 18.24, slightly below the technology sector average of 19.25. The stock's implied volatility stands at 95%, significantly higher than its historical volatility of 38.9%, suggesting a potential big move post-earnings.
The daily chart indicates that Cisco's stock has fallen from a high of $130.28 in June to its current price. It is approaching a death cross pattern, with the spread between the 50-day and 200-day Exponential Moving Averages narrowing. The Average Directional Index (ADX) has risen to 23, signaling continued downward momentum. The stock may drop further to the key support level of $88.32 or attempt to retest the lower side of the descending channel at $100.