This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Market Preview: Searching for Safe Havens

Cisco is still in transition and Wall Street is split on the stock ahead of the report. Half of the 44 sell-side analysts covering the shares have ratings of strong buy (11) or buy (11), while the other half are at hold (19) or underperform (3). The median 12-month price target of $20 implies upside of 10% from current levels.

The actual earnings aren't usually the problem for Cisco as the networking equipment giant has beaten the consensus view in eight straight quarters. It's the guidance that usually gums up the works. Jefferies previewed the report on Tuesday, saying it expects an in-line quarter and "decent" guidance, but sticking with a hold rating and $15.75 price target. The firm said it's staying on the sidelines because the verdict on the company's turnaround efforts is still out.

"While the stock is fairly cheap, it's still early days in the company's restructuring efforts," Jefferies wrote. "Also, we expect that there's significant inertia in the business -- these types of turnarounds can take a long time. Lastly, the outlook for the business (and earnings power) can still get worse. We believe the company is bracing for more margin pressure down the road."

Jefferies said it looks like enterprise spending held up pretty well for Cisco during the quarter but its expectations for earnings of 37 cents a share on sales of $10.86 billion are below consensus. The firm is anticipating revenue growth in the low single digits going forward from Cisco. The current average analysts' estimate is for earnings of 42 cents a share in the January-ended quarter on revenue of $11.14 billion, a view that Jefferies is comfortable with.

"While the overall macro environment remains weak, the U.S. economy appears to be stabilizing a bit and European sovereign debt worries appear to have eased (at least for the time being)," the firm wrote. "We expect enterprise IT spending to continue on its slow march upward as a result, missing its typical calendar Q4 uptick. This, of course, will be offset by slower U.S. carrier capex spend in calendar Q4. In total, we expect Cisco to guide for revenue growth lower than typical seasonality, which implies Y/Y growth approaching the mid-single digits."

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,324.85 +58.86 0.34%
S&P 500 2,018.07 +6.71 0.33%
NASDAQ 4,607.14 +13.7150 0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs