Cisco Systems (CSCO) stock rose 8.4% last year. However, the recent tech sell-off impacted the stock, and it fell 16% in December and has fallen 16.7% since the beginning of October. Cisco stock returned 10.3% in 2016 and 29% in 2017.
What could drive Cisco stock higher?
Cisco Systems, a hardware networking giant, is a leader in the routing, switching, and network security markets. It holds 53.4% and 39.8% of the Ethernet switching and enterprise router markets, respectively. Between 2018 and 2023, the global Ethernet switch market is estimated to grow 2.65% compounded annually.
Ethernet switches’ demand is likely to be driven by their widening application across verticals such as the Internet-of-Things and automobiles. The $113 billion traditional infrastructure market, of which Cisco accounts for 13%, grew 3% in 2017.
Cisco is now moving away from the traditional networking gear space and focusing on network security and software. Growth in the network security business helps Cisco offset its mature verticals’ revenue decline. Last year, Cisco’s network security business grew 10% year-over-year, The cybersecurity market, estimated to reach $181.77 billion by 2021, provides the company with a significant revenue growth opportunity.
Cisco is also looking to expand its software and service revenue, which it expects to comprise 50% of its total sales by fiscal 2020. Software and services are also expected to grow Cisco’s recurring and subscription-based sales. The company’s service revenue grew 5.1% in fiscal 2016, 2.6% in fiscal 2017, and 2.6% in fiscal 2018.