This Day On The Street
Continue to site
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

Can Cisco Overcome Wall Street's Doubts?

Cisco expects earnings per share of 45 cents to 47 cents on revenue of $11.5 billion to $11.9 billion, in line with analysts' EPS forecasts of 46 cents on $11.7 billion in revenue. The company earned $8.04 billion, or $1.49 per share, for the full fiscal year, an increase from $6.49 billion, or $1.17 per share, in fiscal 2011. This is while revenue arrived at $46.1 billion, up from $43.2 billion in the previous year.

What About Tomorrow?

While no one is expecting Cisco to grow as it did in the mid to late 1990s, there is considerable doubt on the Street that it can grow at all. Providing investors a reason to believe is the company's biggest challenge -- that, and fighting off the competition from F5 (FFIV), Juniper (JNPR) and Hewlett-Packard (HPQ), all gunning for market-share dominance.

I think Cisco's management deserves a lot of credit for ignoring the noise and instead focusing on sound execution. The company has admitted some mistakes, many of which has caused Juniper and F5 and, to some extent, Riverbed (RVBD) to come out of nowhere and establish a presence in that all-important enterprise market.

Nonetheless, despite recent embarrassments about some failed acquisitions, Cisco still owns 60% in its core routing and switching business. This is while HP and F5 recently reported slower than expected market share growth.

It seems management has gotten more realistic about Cisco's operating structure and, better yet, its prospects for growth and returning value to shareholders.

Bottom Line

When assessing Cisco's investment worthiness, one of the first things that I notice is its strong balance sheet, one that carries almost $50 billion in cash. This gives it more flexibility over the competition.

With the level of cash on Cisco's books, even on the most conservative assumptions, the stock should be trading at $25. This assumes a modest 4% annual growth in free cash flow.

At the time of publication the author had no position in any of the stocks mentioned.

At the time of publication, the author held no position in any of the stocks mentioned.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CSCO $27.49 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs