This Day On The Street
Continue to site
ADVERTISEMENT
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

Cisco's Slump Not as Bad as Wall Street Thinks

NEW YORK ( TheStreet) -- Cisco (CSCO - Get Report) shares plunged in early Thursday trading, losing 7.5% after it reported earnings that beat consensus, but concerns about the global recovery remain. However, it's not as bad as investors are making it.

First-quarter guidance was a little weaker than what Wall Street was expecting, but concerns over job cuts and the global recovery are pulling shares down sharply. On Cisco's earnings call, CEO John Chambers said the economic recovery is showing mixed signs. "The environment is improving slightly, but nowhere near the pace that we want," Chambers said.

The company also announced it would be cutting 4,000 jobs amid a restructuring program.

For the fiscal fourth-quarter, Cisco reported earnings of 52 cents per share on $12.4 billion in sales, up 6% year-over-year. Analysts surveyed by Thomson Reuters expected Cisco to earn 51 cents a share.

Despite the sharp decline in shares, it's not all bad. UBS analyst Amitabh Passi, who rates shares "buy" with a $28.50 price target, noted that the company is still executing well amid the weak economic recovery. "CEO Chambers noted economic recovery was slower and more inconsistent than expected," Passi wrote in his note. "With this backdrop, we believe Cisco is executing well, meeting/exceeding margin, EPS, and capital return targets, with mgmt noting $1m deals rose 50% y/y. While macro softness could stall some share momentum, we see Cisco well-positioned among leading IT providers and retain a Buy rating."

There were some bright spots during the quarter, with video product sales rising 23% year-over-year, wireless access points rising 32% to $637 million and data center equipment rising 43% year-over-year. Yes, there were a couple bleak spots, including Next Generation Routing sales showing flat growth at $2.09 billion, and collaboration tools falling 2%, but the cautious tone is hurting the stock, notes BMO Capital Markets analyst Tim Long, who rates shares "outperform," with a $29 price target.

"The quarter itself was fine and even guidance was okay, albeit a little on the light side, but management's more cautious tone and the announced layoffs suggest it could take some time before growth picks up again," Long wrote in his note. "In the end, our estimates are not changing all that much, but the multiple will take a hit given how strong the stock has been YTD."

1 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
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!
SYM TRADE IT LAST %CHG
CSCO $28.82 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs