Understanding the Embedded Expectations in Cisco Stock

Value Expectations submits:

Cisco Systems (NASDAQ:CSCO) delivered a shock to the investment world Wednesday, lowering its quarterly and fiscal year sales guidance by a notable amount, causing the company’s shares to suffer a 16% drop Thursday. However, we question whether such a drastic drop in share price was justified given the adjustment to guidance.

To assess the reasonableness of CSCO’s current trading price using AFG’s Value Expectations interface, let’s look back at a historical time for the company, when its shares were trading at astronomical highs, as an example. In July 2000, shares of Cisco had 65% annual sales growth priced-in – expectations that were very high and later proved to be unrealistic. From 2000 to 2001, Cisco ended up underperforming the S&P 500 by around 62%, showing that unreaso

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