Cisco (CSCO) is the largest manufacturer of networking equipment perfectly positioned to benefit from growth of the Internet. The stock dipped after it reported earnings, but here is why Cisco is an attractive opportunity for the long-term investor on any further weakness in price.
Cisco is providing equipment and services that are essential to the Internet, a rapidly growing market. Cisco defines ‘Internet of everything’ as intelligent connection of people and things. Connecting things to the Internet is exploding. For the first time in 2009, the ratio of things connected to the Internet to the people using the net exceeded one. By 2015, the ratio is projected to explode to four and by 2020 the ratio is projected above 12.
Cisco reported good earnings for the fourth quarter. EPS came at $0.52 vs. consensus estimate of analysts of $0.51; revenues at $12.4 billion were mostly in line with the consensus estimate. Cisco generated a record $4 billion in operating cash flow in the quarter.
Projections from the company were slightly weaker than the consensus estimates. Cisco sees for this quarter EPS of $0.50 – $0.51 compared to consensus of $0.51; Cisco guided revenue growth for Q1 in the range of 3-5% year over year vs. consensus of 4.9%. What has hit the stock is not so much the tepid projections but the cautious tone on the earnings conference call. The company was cautious on outlook in Asia.
Good Macro Outlook
Cisco’s large size makes macro-economic factors material to its outlook. The leading economic indicators that I follow are weakening in Asia ex-Japan but the leading economic indicators in Europe and the United States are getting better….Read more at Forbes
