Cisco (CSCO) has been living up to its reputation as a stodgy tech giant of late; shares of CSCO stock have gone nowhere over the last year or so. Cisco stock is trading just above $23 … which is almost precisely where it was 12 months ago.
The silver lining, if you’re looking for one, is that CSCO is at least in the black year-to-date. Shares have marched 4% higher since the start of 2014 — hardly headturning, but not bad considering the broader Nasdaq has amassed year-to-date gains of just 2% thanks to the recent bloodbath.
But while Cisco stock’s performance has been boring over the last year, analysts have still found plenty to talk about. Heated debates have been going on about the company’s prospects — debates that you’d better be tuned in to if you’re considering a position. Let’s take a look at the two main points of controversy:
Cisco Stock Debate 1 — Unlocking Value
Ever since eBay (EBAY) and Hewlett Packard (HPQ) announced plans to split their businesses, everyone has been yapping about whether Cisco should do the same. Many believe a split is likely considering John Chambers’ upcoming retirement, but not all think it would even be beneficial.
RBC Capital Markets analyst Mark Sue, for one, is on the pro-split side. He wrote that Cisco “is too big and has been too slow to combat an onslaught of nimble players” … adding that “a dramatically different structure may be needed to unlock Cisco’s potential and accelerate its pace (of growth).”
Meanwhile, Citigroup’s Ehud Gelblum said … well, the exact opposite. He says “a Cisco break-up does not create much more value than is currently in the stock, despite what we consider are generous assumptions.” And those are just two quick examples. Keep an eye on this conversation going forward, as the split chatter itself could be a short-term factor for Cisco stock.
Cisco Stock Debate 2 — Macro Trends
Analysts were arguing about Cisco stock even before talk of a possible split really heated up, though. One common point of contention is whether broader technology and economic mega-trends work for or against the tech giant. For instance, a recent Bernstein note pointed out that because IT budgets remain a target for cost reduction, software-defined networking is “happening now” — a common complaint from Cisco stock bears.
Of course, some view that as a negative for the company … while others like Bernstein actually think it represents an opportunity. As Bernstein put it: “Cisco is now the best positioned player to bring the innovation to the wider market.”
For the cherry on top, IT spending is also tossed around in countless Cisco stock debates. Some will say that IT spending will remain on the chopping block, but Bernstein believes that “the company recently suffered from anaemic IT spending growth and is excellently positioned for a recovery.”
Once again, these factors — which are complex and intertwined — will be a big deal for Cisco stock. And as analysts continue to talk about what’s next for shares of CSCO, potential investors should be sure to listen.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
