|Bid||0.00 x 800|
|Ask||65.54 x 800|
|Day's Range||64.90 - 65.15|
|52 Week Range||32.98 - 67.49|
|Beta (3Y Monthly)||1.55|
|PE Ratio (TTM)||124.23|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
More than once over the past couple of decades, networking giant Cisco Systems (NASDAQ:CSCO) has been lumped in with other hardware stocks, and rightfully so. For the better part of its existence, Cisco stock has been an investment in networking hardware. Its business has been mostly dependent on enterprise-level IT upgrades.Source: Valeriya Zankovych / Shutterstock.com As the underlying technologies have changed, however, so too have Cisco's opportunities. It's still a hardware name to be sure, but it's also a software name. It's even becoming a recurring revenue platform.This paradigm shift didn't even come close to staving off a huge setback in August. CSCO stock fell from its July peak near $58 to last month's low around $46, with most of the selloff sparked by lackluster guidance for the quarter now underway. Headwinds in China also concerned shareholders.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe dip is ultimately an opportunity to step into a misunderstood and undervalued name. CSCO Stock Undervalued, UnderappreciatedThe post-earnings response was understandable.Cisco stock was already fighting a losing battle, peeling back from its July peak after announcing its intent to acquire Acacia Communications (NASDAQ:ACIA). Despite topping earnings and revenue estimates for the three-month stretch ending in July and pumping up the top line by 6%, earnings guidance of between 80 and 82 cents per share for its first fiscal quarter of 2020 wasn't the 83 cents analysts were modeling. Sales growth could also be flat for the quarter underway, following a 25% tumble in the previous quarter's China-driven revenue. Though the top end of Cisco's guidance was 2%, it was still short of consensus projections of 2.5%. * 7 Best Tech Stocks to Buy Right Now The steep 20% selloff, however, largely ignores the fact that Cisco stock is now trading at 18.7 times its trailing earnings and only 13.6 times its forward-looking income.There are cheaper stocks out there, but there aren't cheaper stocks out there like CSCO. Indeed, even the usual valuation measures don't apply without a footnote. In this case that footnote is $33.4 billion worth of liquid assets or outright cash sitting on Cisco's balance sheet, versus its market cap of $201 billion.The valuation also doesn't reflect the fact that, although it's been occasionally uneven thanks to new competition from the likes of Juniper Networks (NYSE:JNPR) and Arista Networks (NYSE:ANET), Cisco hasn't failed to produce some level of profit in any quarter for over a decade. That includes the 2008 recession prodded by the subprime mortgage meltdown.And that reliability is only poised to improve. Cisco Embraces SubscriptionsThe company has arguably touted the idea more than it's mattered yet. Nevertheless, recurring revenue is a key part of its new business model.For the record, it's actually been a piece of the Cisco strategy as far back as 2017. That's when the tech giant launched its first-ever subscription-based product leveraging its Catalyst 9000 networking platform. But, CEO Chuck Robbins explained in March that recurring revenue should make up 30% of the company's total business within the next three years.To that end, as of the recently ended quarter, software subscriptions made up 70% of total software revenue. Applications and services only accounted for a little more than one-third of Cisco's total business.It's not clear if the company's fiscal trajectory is on pace to reach the goal. The paradigm shift within the technology arena favors Cisco exceeding that goal rather than falling short of it.One only has to look at the evolution of cloud computing to see renting rather than owning is the new norm. Amazon (NASDAQ:AMZN) has built a multi-billion dollar business on the premise of providing access to remote servers to organizations that don't want a giant server bank on-site, or can't afford the cash needed to outright buy a data center.Cybersecurity service provider FireEye (NASDAQ:FEYE) has taken the idea a step further. It provides an entire suite of cloud-based digital security solutions that in the past would have been installed on-premise. Its customers enjoy the fact that for a small recurring fee, their service providers keep that cloud-based software, service and storage up-to-date.Amazon and FireEye like the fact that the underlying contracts make for predictable revenue.The trend dovetails nicely into Cisco's relatively new software-based routing platforms like its SD-WAN, which automatically remain up-to-date and secure without any major maintenance needed on the user's end. In the past, major improvements may have required a much more expensive purchase of new hardware. The Bottom Line for Cisco StockIt's all still a work in progress making it difficult to pinpoint where Cisco will be three years from now. Indeed, it's difficult to say where the company will be one year from now. To the extent its risk and potential can be weighed, however, Cisco stock looks like a buy-worthy bargain here.Headlines spurred an emotional response last month, which resulted in a knee-jerk selloff. Weakness in China didn't help in that regard. A closer inspection of the numbers would have made clear that Asia still only accounts for 15% of total revenue.Either way, with a potential end to the tariff war looming at the same time the company is just getting very, very good at revenue-steadying subscriptions, this beaten-down iconic name just might make for a decent addition to most portfolios.As of this writing, James Brumley held a long position in FireEye. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 3 Artificial Intelligence Stocks to Buy * 7 Industrial Stocks to Buy for a Strong U.S. Economy * 3 Beaten-Down Bank Stocks to Buy and Hold for the Long Term The post Buy Cisco Stock for the Bargain, Stick With it for the Stability appeared first on InvestorPlace.
Over the long run, network technology specialist Cisco (NASDAQ:CSCO) makes investment sense. With a surge of innovations, especially the 5G network rollout, Cisco stock is incredibly relevant. Plus, with tech increasingly representing a geopolitical flashpoint, CSCO should enjoy strong government support.Source: Ken Wolter / Shutterstock.com However, these positive fundamentals currently clash with technical pressures. Despite a strong and relevant business, CSCO stock has been unable to avoid the fear resulting from potholes such as worrying economic metrics and the ongoing (and escalating) U.S.-China trade war.Cisco stock is starting off September in a cloud of pessimism. In the prior month, shares lost more than 15% of their market value. As a generally stable and dividend-bearing equity, such a loss is certainly an eyesore.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTo be fair, the company is doing all it can to avoid the red ink. For example, in its fiscal fourth quarter of 2019, CSCO produced a beat on both the top and bottom line. Against a per-share profitability target of 82 cents, the company delivered 83 cents. For the consensus revenue estimate of $13.38 billion, actual revenue came in at $13.43 billion.Unfortunately, management disclosed that China revenue was down 25% on an annualized basis for Q4. Adding to the already acute trade war fears, CEO Chuck Robbins admitted, "What we've seen is in the state on enterprises … we're just being -- we're being uninvited to bid."With management's downgrade for both earnings and revenue in fiscal Q1 2020, Cisco stock had nowhere to go but down.At the same time, the underlying narrative hasn't changed for CSCO stock. How then should investors respond to the market carnage? The Longer-Term Bull Case for Cisco StockInvariably, anybody looking at the fallout in the CSCO stock price without the full context will hesitate. With the broader indices also flashing warning signs, it doesn't seem like an ideal time to jump in.However, such logic, although understandable, ignores the longer-term bull case for Cisco stock. And as you might expect, this positive narrative focuses on the 5G network. * The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off At this point, everybody and their grandparents have heard of 5G. What makes Cisco stock stand out is the firm's underlying cohesive approach to the technology. As even their own website declares, if you can't monetize the innovation, 5G is merely a different cog in radio frequencies.To that end, I appreciate management's directed acquisition strategies, including their plan to buyout Acacia Communications (NASDAQ:ACIA) for $2.6 billion. In its native form, Acacia specializes in "disruptive" high-speed communications technologies. Particularly, Acacia is known within the networking industry for optical interconnect solutions.Under the current technological landscape, high latency (or the time to transfer data from sender to receiver) and power consumptions represent major challenges. This is especially the case for data transmissions over long distances.With areas such as cloud computing, data centers and video conferencing demanding lower latencies, an Acacia acquisition makes sense for Cisco and CSCO stock. Certainly, it gives the tech firm a competent, practical advantage in the 5G rollout.And whether it wants to or not, Cisco plays a pivotal role in U.S. national interests. Increasingly, our geopolitical rivalries with China and Russia are evolving from kinetic concerns to digital ones. As such, you can expect the federal government to ease up on its aggressive stance against big tech. Technical Pressures Weigh on CSCO StockHowever, Cisco stock isn't an easy bull argument to make because of the trade war. With national pride and political credibility at stake, neither side has demonstrated a willingness to concede.Plus, we've already seen the devastating impact that the economic conflict had on CSCO. A 25% reduction in regional revenue is nothing to scoff at. The volatility is very concerning from a technical sentiment perspective. The initial wave of selling pressure that began in late July dropped CSCO stock below the 50-day moving average. Later, the earnings disappointment plunged shares below their 200-day moving average.Right now, CSCO is in a no man's land. Given the overriding pessimism in the broader markets, I believe shares risk falling first before picking back up.But if Cisco stock does drop to levels near what we saw early this year, I think it's an opportunity. As I mentioned above, Cisco is simply too important to the rollout of next-gen technologies. That should help mitigate volatility as we close out this year and head into the next.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * The 8 Worst Stocks to Buy Before the Trade Turmoil Cools Off * 7 'Strong Buy' Stocks to Beat Volatility * 7 Mega-Cap Tech Stocks on a Rebound Now The post Technical Pressures Weigh on Cisco Stock appeared first on InvestorPlace.
Cisco (NASDAQ:CSCO) stock was having a fairly good year -- until a couple weeks ago. Cisco's fiscal fourth quarter earnings report had some ominous details. The result was that CSCO stock had its biggest drop in about six years -- 8.6%. Cisco stock also fell ahead of earnings, for a total drop of 12.3% in two sessions.Source: Ken Wolter / Shutterstock.com Since then, the shares have remained depressed, even though the overall markets have staged a nice rally. * 10 Stocks to Buy for September So let's take a look at the quarter. On the positive side of things, CSCO reported its strongest growth on the top line in about six years, with revenues up 6% to $13.4 billion. There was actually strength across all the main businesses like switches, routers and other networking equipment. The security unit also remained strong, with sales up about 14% to $714 million.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn the meantime, CSCO continues to invest heavily in its M&A. The biggest deal was for Acacia Communications (NASDAQ:ACIA), for $2.6 billion. The company is a fabless semiconductor operator that is focused on high-speed interconnect offerings. The deal certainly looks like a synergistic fit and should help with growth.There have also been a variety of smaller deals. For example, Cisco has acquired Voicea, which has a real-time transcription service for meetings. Then there was the acquisition of CloudCherry, a provider of technology for customer experience management. At the core of this is advanced predictive analytics and machine learning. So What Was the Bad News?Okay, so why did Wall Street sell off Cisco stock? Well, the guidance was not encouraging. The current quarter is likely to see revenue growth of 0% to 2%, while the Street was looking for 3% (the company does not provide full-year guidance). CSCO also expects earnings to be below forecasts.As the global economy has come under pressure, Oracle's sales to service providers have decelerated. Let's face it, such purchases can easily be delayed whenever there is economic uncertainty. Keep in mind that other suppliers of large technology equipment -- like NetApp (NASDAQ:NTAP) -- have also reported disappointing results.For CSCO, there could be further problems as competitors like Arista Networks (NYSE:ANET) and Hewlett Packard Enterprise (NYSE:HPE) get more aggressive on pricing to pick up new customers In other words, Cisco's margins could be vulnerable.Next, the situation in China remains a nagging issue. On the earnings call, Cisco CEO Chuck Robbins noted that sales to providers in the country have taken a big hit (down a grueling 25%). Note that it appears that the company is not even being invited to bid on new projects!It's not clear how long this will last. But given that there has been little substantive progress on trade talks, the problems in China could persist for some time. Bottom Line on Cisco StockWith the drop-off in Cisco stock, the valuation is now at reasonable levels. Consider that the forward price-to-earnings ratio is at roughly 13x. The dividend is also an attractive 3%. This is actually among one of the highest in the tech industry.CSCO also should continue to generate strong cash flows. For fiscal 2019, they came to a hefty $15.8 billion, up 16% on a year-over-year basis. There is about $33.4 billion in the bank.So for now, there may be a floor on CSCO stock, as the bad news seems to be factored in. On the other hand though, this does not mean there will be much upside either from current levels. There are few headwinds on the horizon. Rather, with the global economy in flux, there could easily be some more negative surprises. * 7 Best Tech Stocks to Buy Right Now So for the time being, there should be no rush to get into CSCO stock.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Best Tech Stocks to Buy Right Now * 10 Mid-Cap Stocks to Buy * 8 Precious Metals Stocks to Mine For The post Cisco Stock May Go Nowhere for a While appeared first on InvestorPlace.
Cisco (NASDAQ:CSCO) has had a tough August. Shares are down over 17% in the past month, from an open of $56.69 on July 29 to $47.10 at the close Aug. 26. The earnings release on Aug. 15 met analyst expectations. But with next-quarter guidance projecting minimal growth, investors are having second thoughts on the future of CSCO stock.Source: Ken Wolter / Shutterstock.com With this in mind, is CSCO a buy? The stock trades at a fair valuation. But with geopolitical risks like the U.S.-China trade war and anticipated declines in share buybacks, it may be tough to find upside. Let's take a closer look at the present and future performance of Cisco stock. A Closer Look at Cisco StockAs mentioned above, CSCO announced earnings on Aug. 15. Sales for the quarter ending July 27 were up 6% year-over-year, with full-year revenue up 7% from the prior fiscal year. Revenue growth was driven by the company's Security (up 14%), Applications (up 11%) and Infrastructure (up 6%) units. Software-as-a-service style software subscriptions now make up 70% of total software revenue. But the company does not anticipate high growth in the next quarter. CSCO projects 0%-2% year-over-year revenue growth and earnings per share between $0.64-$0.69.InvestorPlace - Stock Market News, Stock Advice & Trading TipsHow about the elephant in the room (the U.S.-China trade war)? Sales in China were down 25%. As the trade war continues to accelerate, revenue decline could continue. Any year-over-year decline in total revenue would materially impact Cisco stock. * 10 Companies Using AI to Grow In light of this, what positive catalysts are in the pipeline for CSCO stock? CSCO recently concluded a buyback plan initiated back in FY18. During that time frame, the company bought back $32.6 billion worth of Cisco stock. The company plans to continue to return capital to shareholders, albeit with a lower level of buybacks. The company plans to devote at least 50% of free cash flow to both share buybacks and dividends. Net of capital expenditures, the company has up to $14.9 billion a year in cash flow. Subtracting $6 billion per year in dividends, this leaves about $8.9 billion max for buybacks. Can Acquisitions Help CSCO Move the Needle?CSCO has $33.4 billion in cash on hand. With the company stepping off the gas pedal for buybacks, acquisitions could be their key to growth. The company announced a deal to buy Acacia Communications (NASDAQ:ACIA) in July. As InvestorPlace's James Brumley discussed Aug. 1, this proposed $2.6 billion deal solidifies CSCO as a 5G hardware supplier. Acacia's products help facilitate long-distance transfer of massive data loads.Once 5G reaches critical mass, CSCO will be in the thick of it, supplying hardware to keep the data flowing across the globe.CSCO has made additional bolt-on deals since 2018. As Brumley discussed, the company has acquired Sentryo, Singularity Networks and six other companies. These bolt-on deals take just a few billion, tops, to execute, leaving plenty of runway for CSCO to grow via mergers and acquisitions. But does the current Cisco stock valuation price in this opportunity?Let's take a look at how the stock's valuation stacks up to peers. Cisco Stock Is Undervalued to PeersCSCO stock currently trades at a forward price-to-earnings ratio of 13.1. The company's current enterprise value/EBITDA ratio is 11.7. Here are the current valuation ratios of some of CSCO's closest peers: * Ciena (NYSE:CIEN): forward P/E of 16, EV/EBITDA of 13.4 * Motorola (NYSE:MSI): forward P/E of 20.1, EV/EBITDA of 17.3 * Nokia (NYSE:NOK): forward P/E of 12, EV/EBITDA of 9.5 * LM Ericsson (NASDAQ:ERIC): forward P/E of 15.8, EV/EBITDA of 11.1On a P/E basis, CSCO stock trades at a discount to the aforementioned peers. On an EV/EBITDA basis, Cisco stock trades in line with its larger peers NOK and ERIC. I believe this is a fair valuation for CSCO stock. While the company could jump start growth via its bolt-on acquisitions, the company's weak short-term guidance is a concern. Coupled with the China risk, I can see CSCO stock falling further. Other legacy tech companies such as Intel (NASDAQ:INTC) and International Business Machine (NYSE:IBM) trade at forward P/E ratios around 10. I could easily see CSCO stock fall to that valuation level. The Bottom Line on Cisco StockThe China situation has taken a toll on Cisco stock. The company's China operations are just a small part of the business. But if sales continue to fall, the company will have a hard time even meeting its low-ball guidance next quarter. Relative to peers, Cisco stock trades at a fair valuation. But with the growth issues, I can easily see CSCO stock start to trade at a lower valuation.So what's the bottom line? Investors should wait out the China situation. Additional Chinese sales declines could push the stock further down. But long term, the company's mergers and acquisitions strategy could help resurrect growth as 5G becomes the standard. Wait for the trade war to reach its nadir before entering CSCO stock.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Companies Using AI to Grow * The 10 Biggest Winners From Second-Quarter Earnings * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk The post Wait for the Trade War to Play Out Before Buying Cisco Stock appeared first on InvestorPlace.
(Bloomberg) -- Cisco Systems Inc. plummeted the most in almost six years after the company gave a lackluster sales forecast, indicating the U.S.-China trade dispute and a slowing global economy are leading customers to delay updates of their computer networks.Chief Executive Officer Chuck Robbins is trying to turn Cisco into more of a software and services company, but the transformation is being stymied by the trade war and its impact on corporate spending. The company still gets the majority of sales from machines that are the backbone of the internet, making it an economic bellwether. The CEO said some customers are showing more caution because of escalating trade tensions.“They’re just hedging their bets relative to some resolution on this stuff,” Robbins said. “We did see in July some slight early indications of some macro shifts that we didn’t see in the prior quarter.” Robbins said Wednesday.Cisco shares declined 8.6% to $46.25 at the close in New York, the biggest single-day fall since November 2013. It was the worst performer Thursday on the Dow Jones Industrial Average. Even with Thursday’s drop, the stock has gained 6.7% this year.Cisco said sales in the fiscal first quarter will be flat to an increase of as much as 2% from the period a year earlier. That implies revenue of as little as $12.9 billion, compared with analysts’ average estimate of $13.4 billion. Adjusted profit will be 80 cents to 82 cents a share, the San Jose, California-based company said Wednesday in a statement.In the fourth quarter, which ended July 27, total orders were unchanged. Emerging markets bookings were down and the Asia Pacific region saw a decline of 8%, Chief Financial Officer Kelly Kramer said on a conference call with analysts.While Cisco gets less than 3% of revenue from China, business there has dropped “dramatically,” Robbins said. State-owned enterprises and some Chinese telecom providers that had used small amounts of Cisco machinery are not interested in bids from the company amid the current trade tension, he explained.Fiscal fourth-quarter net income fell to $2.2 billion, or 51 cents a share, from $3.8 billion, or 81 cents, a year earlier. Revenue was $13.4 billion, a seventh quarterly expansion. Excluding certain items, Cisco posted profit of 83 cents a share, compared with the average analyst estimate of 82 cents, according to data compiled by Bloomberg.Orders in the Americas and Europe increased, albeit slowly. Bookings from service providers, such as telecom and cable-TV operators, slumped 21%, while government and commercial customers sought more gear than they had a year earlier, Cisco said.Cable companies aren’t buying new equipment -- instead, they’re trying to wring as much life as they can out of their existing gear, Robbins said in an interview. The phone-service providers are spending on consumer 5G, or fifth generation, networks. These customers will shift investment to Cisco’s gear, which lives in their data centers, when they’re deploying business services on those new networks that require greater traffic management, he said.Robbins said he sees little need for concern that the overall economy is about to drop.“There’s a lot of geopolitical dynamics, and I’ve said multiple times that I’ve been shocked how well the macro has held up,” he said. “In most of the world it wasn’t terrible at all. I would not make it a broad-based assertion yet.”In the recent period, Cisco’s hardware business generated sales of $7.88 billion, a gain of 6%. Applications, its software unit, was up 11% at $1.49 billion and security revenue jumped 14% to $714 million.Cisco is the biggest maker of routers, switches and other gear used to connect computers. The company gets a tiny percentage of sales from China, where it’s been largely locked out of the market. Almost 60% of revenue comes from the Americas region.Under Robbins, Cisco has made a string of acquisitions to build a software and services business. Earlier this month, it announced plans to buy closely held Voicea, a maker of software that provides real-time transcription and voice search capabilities.Cisco is still buying hardware companies, too. In July, it agreed to acquire Acacia Communications Inc. for about $2.6 billion, gaining chips and machines that help translate optical signals into electronic data.(Updates with share price in the fourth paragraph.)To contact the reporter on this story: Ian King in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Alistair Barr, Andrew PollackFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Cisco (CSCO) is benefiting from its expanding footprint in the rapidly growing security market. Further, partnerships and accretive acquisitions will boost its revenue base.
Acacia Communications, Inc. (ACIA) delivered earnings and revenue surprises of 16.67% and 2.30%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?
Most Cisco Systems (NASDAQ:CSCO) shareholders apparently cheered Cisco's acquisition of optical communication technology company Acacia Communications (NASDAQ:ACIA), as the already-overbought Cisco stock rose following the announcement of the deal. It's possible that many of those investors, however, don't fully understand the significance of the transaction.Source: Shutterstock The networking giant will bolster the breadth and depth of its fiber optic tech portfolio by officially making Acacia, which was already a CSCO supplier, part of the Cisco family.It's a development that merits a look beyond simple explanations, though, even for the non-tech layperson who happens to hold Cisco stock. Although the deal won't immediately boost Cisco stock price, the transaction sets the stage for Cisco stock to rally beginning in 2020.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Another Smart DealCisco CEO Chuck Robbins has made clear since he took the helm in 2015 that Cisco would use what's now a $35 billion war chest to invest in bolt-on businesses. And that's what he's been doing. Shortly before the $2.6 billion offer was made to Acacia, Cisco announced its intent to acquire Sentryo. In January, it bought Singularity Networks. In 2018, Cisco acquired six companies.The Acacia deal is another big step down a mostly-underestimated path that Cisco is already traveling, though. With Acacia, CSCO now has something it can offer network operators that will have to use fiber optic solutions to handle the massive data loads which the advent of 5G connections will create.In short, Acacia's wares, known as coherent optical interconnect products, facilitate so-called long-haul optical communications that can travel thousands of miles.Acacia's products are the perfect complement to Cisco's large-scale networking portfolio, though they also bolster the "inside the data center" optical networking technology that CSCO obtained through last year's acquisition of Luxtera. Coherent Technology Is the Inevitable FutureCoherent technology is a vague term used to describe using light-based signals to communicate at 100G speeds (and beyond) for long, long distances.Cisco didn't invent it, exactly. Arguably, it was smaller rival Ciena (NYSE:CIEN) that laid the ground work for long-distance fiber optic communications a decade ago. Ciena hasn't been able to commercialize the technology the way Cisco appears it will be able to, however.5G wireless speeds are set to effectively be three to four times faster than 4G connections, though in practical theory, they could be ten or twenty times faster. That makes 5G a potential alternative to wire-based internet communications.For perspective, Cisco forecasts that global coherent traffic will reach 13.2 exabytes per day in 2022, up from 4.1 exabytes per day in 2017. 5G devices will spur much of that new traffic.The catch is that radio signals can only travel so far, and cross-country communications can't be handled by radio. They have to be carried by a physical line at least some of the way. Fiber optics, or optical networking, are the only way to do that. And to make optical networking feasible, many 100G-capable fiber optic lines will have to be laid down. That, of course, is where Cisco's coherent technology will come in. Looking Ahead for Cisco StockThe coherent optical technology hardware market is expected to be worth $70 billion by 2026, according to Acumen Research and Consulting. That's more revenue than Cisco produced over the course of the past four reported quarters, pointing to a tremendous growth opportunity and a huge potential positive catalyst for Cisco stock.Current and prospective owners of Cisco stock may not want to celebrate just yet, however. Other players are gunning for a piece of that market. The aforementioned Ciena is one of them. NeoPhotonics (NYSE:NPTN) is another. Infinera (NASDAQ:INFN) is still another.Only a handful of players can offer a soup-to-nuts solution, though.Jimmy Yu, vice president and industry analyst for the Optical Transport program with Dell'Oro Group, explains: "Once Cisco concludes this acquisition, four optical system vendors will have in-house capability for developing and producing the key components for coherent line cards. The four system vendors are Cisco, Ciena, Huawei, and Infinera."Of the four, Cisco stands out as the one most operators are willing to bet will be around and available into the future, with the least risk of running into political turbulence. That's good news for CSCO and Cisco stock price.The 5G-driven growth of Cisco's coherent technology arm may not materialize until next year, but given its potential, Cisco stock could plausibly start to reflect that opportunity this year.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 A-Rated Stocks Under $10 * 8 Monthly Dividend Stocks to Buy for Consistent Income * 7 Disruptive Biotech Stocks to Buy for 2025 The post What the Acacia Acquisition Means for Cisco Stock appeared first on InvestorPlace.
Acacia Communications, Inc. (ACIA) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
With Q2 earnings season ramping up, here's a look at 16 stocks, including Acacia, StoneCo, Splunk, Kirkland Lake Gold, and Paylocity, expecting 50%-550% EPS gains.
Telecom gear supplier Ciena is the IBD Stock Of The Day. Ciena is trading near an 11-year high after the Cisco Systems acquisition of Acacia Communications raised the profile of its peers.
The index endured a turbulent week but gained after the Fed Chair indicated that a rate was likely later this month.
Cisco Systems has decided to acquire its supplier Acacia Communications for ~$2.6 billion in cash. How will each company benefit?
Shares in Cisco Systems (NASDAQ:CSCO) haven't been this hot in 20 years. Back then, Cisco briefly reigned as the world's most valuable company, its switches and routers being at the heart of this new thing called "the internet."Source: Shutterstock Those days are gone, along with the sweet, sad song of your dial-up modem. But Cisco stock is up 33% so far in 2019. The bull run continued July 10 as analysts applauded its $2.6 billion buyout of Acacia Communications (NASDAQ:ACIA), due to close at the back end of a fiscal year that begins in August.Acacia was already supplying optical interconnects for Cisco switches. Buying the company gives Cisco intellectual property it can use to keep selling gear to both the Cloud Czars and their retinue, the co-location sites, telcos and scaled enterprises that are constantly demanding more speed from their connections.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut is this an offensive or defensive move? Fighting HuaweiOf all the large U.S. tech companies, none is as much in the crosshairs of China's Huawei as Cisco.Huawei was the main target for President Donald Trump in the China trade war, but this week's relaxation of those sanctions means its lower-cost networking gear is back in the frame, at least for international buyers. * 7 Retail Stocks to Buy for the Second Half of 2019 The companies I call the Cloud Czars -- Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB) -- are always focused on cutting costs in their data centers, where capital spending now costs $100 billion per year.Low-cost, commodity hardware built with open-source standards always has an advantage in this market, against any proprietary solution. Huawei sales have risen nearly 10-fold in the last decade.As the relationship between Huawei, with its low costs, and U.S. companies thaws, Cisco needs control of patented technology to stay relevant. The result has been a buying spree. It bought Duo Security last year for $2.35 billion in cash and stock; then chip maker Luxtera for $660 million in cash and assumed equity; and, now, Acacia. Cisco Stock Is Not CheapIndustry analysts and market analysts all approve this strategy, which is why Cisco is a hot stock.At around $57 per share, Cisco has a market cap of $244 billion. By some metrics, the price is still reasonable -- the trailing price-to-earnings ratio is under 20, and it offers a 35-cent quarterly dividend yielding 2.5%. But until this year, Cisco was considered a dividend aristocrat, not a growth play.As one analyst (OK, it was me) wrote last year, "boring can be beautiful." Even in May I called Cisco a conservative tech investment, suggesting you just put it in your pocket and let time work its magic.That article was published soon after I took my own advice and stuck some Cisco in my own retirement account, at about $51.40 according to my bookie. (OK, it was my broker.) I'm up 10% in three months, plus there's that dividend, still better than the 2.07% yield on a 10-year government bond. The Bottom LineCisco is still Cisco. It's not BeyondMeat (NASDAQ:BYND). This is not 1999. My red beard is not coming back.The moves CSCO stock has made in the last year, and the moves it will continue to make, are primarily defensive in nature. Cisco CEO Chuck Robbins knows that, as hardware becomes software, maintaining a proprietary edge against low-cost solutions remains essential.That's going to cost money. Cisco is spending money. It had nearly $25 billion in cash and short-term securities in the bank as of March. Acacia represents just over 10% of that cash, a small price to pay for protecting its exposed flank.Just be aware. That flank remains exposed.Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O'Flynn and the Bear, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT, AMZN, AAPL, and CSCO. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Stocks to Buy on College Students' Radars * 7 Retail Stocks to Buy for the Second Half of 2019 * The S&P 500's 5 Best Highest-Yielding Dividend Stocks The post Cisco Stock Investors Party Like Itas 1999. Itas Not. appeared first on InvestorPlace.
Bank of America's Tal Liani maintained a Buy rating on Cisco with an unchanged $62 price target. Cisco offered to acquire Acacia for $2.6 billion in what looks like a "defensive and offensive move," Liani said in a Wednesday note. On the offensive side, the deal will expand Cisco's switches and routers through adding new use cases and target markets, the analyst said.