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Cisco Systems, Inc. Message Board

  • investora2z investora2z Aug 31, 2013 7:03 AM Flag

    Around crucial supports

    The fall after the earning has given an opportunity to investors who want to be with the stock for the long term. It is around crucial supports, and may rebound if the markets remain sensible. The valuations are better and the dividend yield is better. Most importantly, the expectations may be lower in the next earnings. So it can do good over the next few quarters. The earnings were not bad, and the company managed to beat the analyst estimates. However, the guidance was less optimistic than what it was earlier. The announcement about the job cuts was a dampener as well. In the Q3 earnings, the positivity of the management was translated into a huge up move by the stock backed by humungous volumes. This time, the guidance was muted. Software and equipment for datacenters and corporate cloud networking is not growing as per the expectations. Product revenue improved more than expected, but service sales increased less than anticipated. Asia and Europe markets are not doing that great. The management forecast for the current quarter was at the lower end of the analyst estimates. Whether we like it or not, analyst opinion does matter. In fact, if the performance is one cent lower than the guidance, the stock takes a beating with significant erosion in market cap. It seems as if everything is totally mathematical. For example, this time the Cisco EPS included a 3 cents charge related to TiVo patent litigation settlement. Cisco faces other lawsuits from the likes of Marathon Patent Group (MARA), and the recently filed case by Stragent LLC. Even small settlements can move the needle. So the risks are there, but a company like Cisco will surely make a comeback. In the long term it can be expected to deliver consistent performance with decent capital appreciation and good dividend yield.

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