Cisco Systems CSCO is set to acquire Splunk SPLK for roughly $28 billion, which equates to $157 per share. The buyout will help Cisco offer solutions that detect threats faced by organizations and respond to threat prediction and prevention.
The deal will boost Cisco’s recurring revenue base. It is expected to be cash flow positive and gross margin accretive in the first fiscal year post-completion and non-GAAP earnings accretive in the second year.
The addition of Splunk will help expand Cisco’s footprint in the cybersecurity domain and accelerate its strategy of securely connecting everything.
Expanding Security Portfolio to Aid Prospect
Cisco shares have returned 16.5% year to date, outperforming the Zacks Computer – Networking industry’s growth of 15.2% but underperforming the Zacks Computer & Technology sector’s return of 34.7%.
Cisco Systems, Inc. Price and Consensus
Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote
Cisco is riding on the growing demand for its security, artificial intelligence and cloud products. Its security portfolio is benefiting from the launch of new data loss prevention, firewall and zero trust capabilities.
Cisco’s investments across the security business, focusing on cloud-based and AI-driven offerings, are expected to drive growth. Expanding growth opportunities for low-power-consuming technologies, including IoT, Silicon One and Power over Ethernet bodes well for the company’s prospects.
For first-quarter fiscal 2024, Cisco expects revenues between $14.5 billion and $14.7 billion. Non-GAAP earnings are anticipated between $1.02 and $1.04 per share.
The Zacks Consensus Estimate for fiscal first quarter revenues is pegged at $14.61 billion, indicating 7.18% year-over-year growth. The consensus estimate for earnings is pegged at $1.03 per share, up a penny over the past 30 days.
For fiscal 2024, revenues are expected between $57 billion and $58.2 billion. Non-GAAP earnings are anticipated between $4.01 and $4.08 per share.
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $57.74 billion, indicating 1.3% year-over-year growth. The consensus estimate for earnings is pegged at $4.05 per share, up a penny over the past 30 days.
Zacks Rank & Stocks to Consider
Cisco currently has a Zacks Rank #3 (Hold).
Dell Technologies DELL and NVIDIA NVDA are a couple of better-ranked stocks in the broader sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVDA and DELL have returned 189% and 71.4% year to date, respectively.
The long-term earnings growth rate for Dell Technologies and NVIDIA is currently pegged at 12% and 13.5%, respectively.
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