Cisco Stock Set for Bounce After 4% Drop Last Week?

Cisco stock (NASDAQ: CSCO) has lost around 4% over the past week and currently trades at just over $54 per share. Additionally, Cisco, a networking solutions conglomerate, has seen its stock lose 10% over the last month, dropping from around $60. However, the company’s recent full-year 2021 earnings (Cisco’s fiscal year ends in July) reported in late August saw revenue rise from $49.3 billion in FY ’20 to $49.8 billion in FY ’21, driven by a rise in both products and services revenue. However, a $400 million rise in restructuring charges saw operating income drop from $13.6 billion to $12.8 billion over this period, leading to a drop in EPS from $2.65 in FY ’20 to $2.51 in FY ’21.

However, after a 4% fall last week, will Cisco stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for Cisco stock average 3.6% (implying an increase in stock price from $54.43 to $56.40) in the next one-month (twenty-one trading days) period after experiencing a 4% drop over the previous week (five trading days).

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 price forecast after a rise or fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day. For additional details about Cisco historical returns, and return comparison to peers see Cisco (CSCO) Stock Return.

MACHINE LEARNING ENGINE – try it yourself:

If Cisco stock moved by -5% over five trading days, THEN over the next twenty-one trading days Cisco stock moves an average of 2.1%, with a decent 61.8% probability of a positive return over this period.

Also, given a -5% movement for the stock over five trading days, it has historically witnessed an excess return of 1.2% compared to the S&P500 over the next 21 trading days, with an average 53.4% percent probability of a positive excess return.

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

Question 1: Is the price forecast 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 expected return of 3.8% 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 expected return of 2.7% for Case 2. This implies a price forecast of $56.50 in Case 1 and a figure of $55.90 in Case 2 using CSCO market price of $54.43 on 10/1/2021.

In comparison, the S&P 500 has an expected 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 expected 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:

You can try the engine to see what this table looks like for Cisco after a larger loss over the last week, month, or quarter.

Question 3: What about the stock price forecast after a rise if you wait for a while?

Answer:  The expected return after a rise is understandably lower than after a drop 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.

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