We recently published a list of Top 10 Trending AI Stocks on Latest Analyst Ratings and News. Since Cisco Systems Inc (NASDAQ:CSCO) ranks 8th on the list, it deserves a deeper look.
AI stocks have pulled back considerably over the past few weeks and analysts believe this is exactly the healthy correction long-term investors were looking for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said that AI stocks have stabilized at levels they can sustain for the rest of the year. The analyst said technical indicators now show AI stocks have gone from overbought to oversold territory.
“Now that positions have been unwound, there’s an opportunity for traders to take positions,” Sluymer reportedly said.
Many others agree with Sluymer. Dan Ives of Wedbush reiterated his view that we are still in the early stages of the AI bull market in a latest program on CNBC.
“If you look at what we’ve seen from AI revolution to broader tech, it’s been strong from an earnings perspective. And the growth scare that we saw, it’s just a bump in the road to what I believe is the fourth industrial revolution playing out,” Ives said.
For this article, we picked up 10 AI stocks that are making waves on the back of latest earnings, analyst ratings or important industry news. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Cisco Systems Inc (NASDAQ:CSCO)
Number of Hedge Fund Investors: 61
Cisco Systems Inc (NASDAQ:CSCO) is trending after posting strong quarterly results. Piper Sandler analysts James Fish and Quinton Gabrielli said in a note that Cisco’s management has indicated that the demand is getting strong again. Analysts believe AI and Cloud are future growth catalysts for Cisco Systems Inc (NASDAQ:CSCO).
Cisco Systems Inc (NASDAQ:CSCO) beat Wall Street estimates on EPS and revenue despite a 10% decline in the latter. So what was special about the results that made Wall Street analysts shower positive ratings?
Cisco Systems Inc (NASDAQ:CSCO) announced a major restructuring plan that includes a 7% reduction in workforce and an estimated $1 billion in pre-tax cost savings. The company’s legacy hardware businesses have been stagnating, with average revenue growth lingering at just 1.6%. Job cuts and cost savings will allow the company to allocate capital to high-growth areas like AI and Cloud networking.
The expected cost savings, which will cut about 2.4% of total operating expenses, could boost Cisco Systems Inc (NASDAQ:CSCO) operating margins by more than 220 basis points in FY25. Although the company is ramping up its AI efforts, it only expects AI to bring in around $1 billion in revenue next year, less than 2% of the total. So, while AI isn’t likely to be a game-changer for Cisco just yet, the focus on growth markets might accelerate overall revenue in the future.
Cisco Systems Inc (NASDAQ:CSCO) could rake in about $55 billion and $56.2 billion in revenue in fiscal 2025, which would be a 4.1% year-over-year growth. Cisco’s services business, which accounts for 27% of total revenue, is expected to grow by 5%. Analysts think possible declines in legacy on-premise networking business would be offset by growth in AI-driven networking.
Overall, Cisco Systems Inc (NASDAQ:CSCO) ranks 8th on Insider Monkey’s list titled Top 10 Trending AI Stocks on Latest Analyst Ratings and News. While we acknowledge the potential of Cisco Systems Inc (NASDAQ:CSCO), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CSCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
