Gaining 5% In The Past Month, What’s Next For Cisco Stock?

by Trefis Team
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Cisco Systems stock (NASDAQ: CSCO) has seen a decent rise of more than 5% over the last month and currently trades at over $58 per share. The rise came due to the growing demand for networking products and software, and strong FY 2021 earnings announced in late August. Cisco saw revenue rise marginally to $49.8 billion in FY ’21, up from $49.3 billion in FY ’20. However, for the three months ended Q4 ’21, revenue came in at $13.1 billion, up from $12.2 billion for the same period in 2020. Further, for Q4 ’21, operating income rose roughly 10% to $3.58 billion, as the company managed to control COGS and SG&A expenses. Combined with a drop in the effective tax rate, this saw EPS rise from $0.62 in Q4 2020 to $0.71 in Q4 2021.

So, after the recent rally will Cisco stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for Cisco stock average close to 1.3% in the next one-month (21 trading days) period after experiencing a 5.5% rise over the previous one-month (21 trading days) period. Further, the stock has a decent 62.9% probability of rising marginally over the next one month. But how would these numbers change if you are interested in holding Cisco stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Cisco stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF Cisco stock moved by -5% over five trading days, THEN over the next 21 trading days, Cisco stock moves an average of 4.1 percent, with a strong 71.9% probability of a positive return.

Some Fun Scenarios, FAQs & Making Sense of Cisco Stock Movements:

Question 1: Is the average return for Cisco stock higher after a drop?

Answer:

Consider two situations,

Case 1: Cisco stock drops by -5% or more in a week

Case 2: Cisco stock rises by 5% or more in a week

Is the average return for Cisco stock higher over the subsequent month after Case 1 or Case 2?

Cisco stock fares better after Case 1, with an average return of 4% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.9% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Cisco stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold Cisco stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For Cisco stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

Cisco’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Cisco stock by changing the inputs in the charts above.

 

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

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