Ciscos Strong Free Cash Flow Could Make CSCO Stock Worth.jpeg
Cisco Systems, Inc. (Csco)) It provided a strong free cash flow, despite high high spending in the fiscal year ending on July 31. This may push CSCO to rise at least 14 % over the next 12 months using medium FCF margins.
Csco in $ 66.50 In the morning trading on Monday, August 18. This decreased from its price on August 13 from 70.40 dollars before issuing its latest results.
CSCO – last 6 months – Barchart – August 18, 2025
But it may be worth it 75.75 dollars For a single arrow using historical FCF margins and revenue expectations. Moreover, the average price of the target analysts is close to this. This article will decrease in these points and explore a short -played strategy (OTM).
Cisco is one of the beneficiaries of the huge artificial spending boom (AI). It provides network equipment, cloud programs and safety solutions used by data centers and companies involved in the prosecution activities.
As a result, the fourth quarter revenues increased by 8 % on an annual basis (Y/Y) to $ 14.3 billion, and its sales increased in July 31) by 5 % to $ 56.7 billion.
However, Amnesty International’s Infrastructure Department received more than two billion dollars as orders in the 25th year, which is higher than its goal of $ 1 billion. This included more than $ 800 million on orders in the fourth quarter alone.
This is a strong growth driver for the company to go forward.
Moreover, CISCO stated that the operational cash flow is very strong and that the free cash flow (FCF) – that is, the cpech spending is lower.
For example, in the latest financial Q4 ending on July 31, the company produced $ 4.234 billion in OCF, represented 28.9% Of its revenues are $ 14.67 billion. This was 13.5 % higher than last year, and the previous OCF margin was 27.3 % less.
Moreover, even with +9.5 % of spending in Capex in Q4, its FCF margins also improved. For example, CISCO $ 4.017 billion created in FCF, which was 27.4 % Revenue. This was 25.89 % higher than the FCF margin last year. Moreover, this year’s $ 13.288 defeated this year only 23.4 % of its revenue for the entire year is $ 56.7 billion.
This means that Cisco’s FCF margins will rise during the next year with a rise in sales.
For example, analysts now expect $ 60 billion sales for the next fiscal year ending in July 2026. This is also the upper party for management directions for the 26th fiscal year.
As a result, if we assume that the company can create FCF margins by at least 25 % (higher than 23.4 % in the 25th fiscal year, but less than Q4 27.4 % margin), FCF can be:
This will be an increase of 12.9 % over last year 13.288 billion dollars in FCF. Moreover, it can raise the value of CSCO stock at least this amount.
Last year, the company paid $ 12.4 billion of profits and operations to purchase shareholders. This represents 93.3 % from $ 13.3 billion in FCF.
Since the maximum CSCO market is 262.726 billion dollars today, according to Yahoo! Funding, this means that the historical FCF return is about 5 %:
$ 13.288 B FCF FY 25/262.725 = 0.05058 = 5.06 %
Therefore, using a 5.0 % similar FCF return and this is applied to our 15 billion dollars expectations:
15 billion dollars annually volt 26 FCF / 0.05 = 300 billion dollars for the market
In other words, if the market gives the stock 5 % FCF in the future, and if CISCO generates $ 15 billion in FCF, the maximum market will increase by 14.2 % to $ 300 billion.
This means that the price of its share will be 14 % more, or
$ 1.14 x 66.50 = 75.81 dollars For the target arrow
This is the same average 26 analysts included in Yahoo! Financing (75.58 dollars For one stock). Likewise, the average price of the BARCART survey is $ 75.06, and stock analysis says 18 analysts have the average target price of $ 74.94.
Moreover, Anachart.com, which tracks the recommendations of modern analysts, writes that 21 analysts have an average of 77.17 dollars For one share as the goals of their price.
The bottom line is that CSCO shares seem less than their value here. One way to play this is to put a lower price in a purchase, to sell short options outside the money (OTM) in nearby expiration periods.
For example, look at the expiration period on September 19, one month away. It explains that the $ 64.00 strike option is 64.00.
This represents a short immediate return of about 1 % (i.e. $ 0.62/64.00 dollars = 0.96875 %) for the price of a strike at less than 3.5 % less than the trading price today.
CSCO puts the expiration of September 19 – Barsht – as of August 18, 2025
The important point is that the investor who does this play can determine a less potential purchase point and get their salaries while waiting.
Moreover, even if CSCO decreases to $ 64.00, the investor tie point is $ 63.38 per share (64-0.62 dollars), which is 4.7 % less than today’s price. Therefore, the investor is likely to get a much lower price using this play.
However, it can still lead to the loss of unreasonable capital, if CSCO remains less than a $ 63.38 tie. Investors must study the risks here. One way to do this is to search for the BARCART Options Teaching Center, profit and loss plans on any contract options.
The bottom line is that CSCO stocks are cheap here, and that the Selling OTM is one of the ways to play on short garbage.
On the date of publication, Mark R. Hack, CFA parking (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article are only for media purposes. This article was originally published on Barchart.com
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