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Cisco Beats but Wall Street Misses

Stocks in this article: CSCO

So let's be careful to not exaggerate what's going on here. Because it's not as if Cisco's management weren't aware of the strategy they were using. Besides, let's not forget that even though gross margin did fall slightly, margin was almost 3% better on an adjusted basis. By and large, it seems that investors continue to miss some very important and meaningfully obvious factors.

Moving on to the issue of guidance, which admittedly was a disappointment. Management expects revenue for the fiscal first quarter to come in the range of $12.2 billion to $12.5 billion, compared with consensus estimates that were closer to $12.45 billion, or the higher-end of the range. But it still implies revenue growth of 5%, which is consistent with Cisco's historical average.

Here again, that the stock has taken such a hit to such a degree solely because management is being a bit cautious, makes no sense. I don't begrudge profit-taking. But let's call it what it is. The stock has had an incredible run this year and investors saw a selling opportunity -- I get it. But to the extent that Cisco's results were a "disappointment," I consider it irrational thinking.

This is still a long-term story. And until anything changes from a cash-flow perspective, which would impact Cisco's long-term revenue growth rate of 5%, this stock remains a strong buy.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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