Cisco Systems Reports Solid Earnings

Cisco Systems (Ticker Symbol: CSCOWealth Strength IndexAAPL is Extremely Up and trending Up) released earnings after the close on Wednesday afternoon.  The technology giant reported a slight beat on earnings per share of .78 cents vs. Wall Street analysts’ expectations of .77 per share.  Revenue also came in better than expected at $12.96 billion vs. $12.89 billion that Wall Street analysts were expecting. Cisco came out on top of last quarter’s guidance and the company also released positive guidance for the remainder of the year as well.  

Cisco has turned its growth around by revitalizing existing products and adding new technology, software, and services to its platforms.  Cisco’s Chief Executive Officer Chuck Robbins said, “Tariff increases on Chinese made goods wouldn’t affect our near term profit outlook.”  The company has stated that they aren’t afraid to invest in new hardware like other tech companies because the tariffs are already priced into their balance sheet and guidance for the year.  

Cisco announced plans earlier this year to team up with Google Station to work together to improve access to the internet globally.  The program is attempting to provide communities with limited access to the internet with sustainable public wifi that is accessible, fast, and secure. Almost half of the world’s population is not connected to the internet, hindering them from being included in economic growth activities.  Today, being connected to the internet is the groundwork for the majority of people’s cultural, social, and economic activities. Cisco and Google’s mission is to eventually include more than one billion people with growth opportunities in the digital economy.

Cisco’s stock had a mixed start to trading in 2018.  The stock found minor support in the first quarter of 2018 at its 100-day Moving Average.  After failing to sustain a rally, the stock found support at its 200-day Moving Average later in the second and third quarters, before briefly breaking below it in the fourth quarter of 2018.  The stock traded in a $10 dollar trading range between the $49.00 and $39.00 price levels for more than 13-months. In early 2019, led by a solid earnings and guidance report, the stock shot through the trading channel it was trading in and shot to the upside and proceeded to rally 40% at its peak in the second quarter of this year.  The stock gapped up higher on the news this morning and is currently up nearly 7% since Wednesday’s close.

(Chart above courtesy of ​www.tipranks.com​)  

Based on a survey of 13 analysts offering 12-month price targets, the average price target for Cisco’s stock is $59.00. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $56.12.

Cisco has been making moves to pivot more towards software and services in order to ease the company’s dependence on its hardware business.  The company has also been following through with its promise to buy back $15 billion of its own stock, purchasing $6 billion worth of shares at an average price of $52.14 this quarter.  Cisco Systems continues to be a dominant force within the tech sector. Investors within the sector should look to competitor VMWare’s earnings release on June 2nd for fresh news within the sector.  

 


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