* Reports Q1 2020 results on Wednesday, November 13 after the close
* Revenue expectation: $ 13.07 billion
* EPS expectation: $ 0.81
Cisco Systems Inc (NASDAQ 🙂 has warned that the global slowdown is starting to take its course and has successfully lowered its fiscal report for the first quarter of 2020, which is expected to be released on Wednesday.
& # 39; The world's largest maker of routers, switches, and other devices that companies use to connect computers is expected to generate $ 13.07 billion in revenue for the period that ended in September, a flat performance in comparison with the same period a year ago. However, earnings will rise to $ 0.81 per share of $ 0.75, according to analysts' consensus forecast.
The ongoing trade dispute between the US and China, combined with a cautious approach to the company's largest customers amid a slowing global economy, are some of the headwinds that encourage companies to slow down their orders or to buy from Cisco products.
These products are considered the backbone of the internet economy, making it an economic bellwether that offers visibility on global demand and future expectations that investors are hard to ignore.
In the last quarterly report, Cisco reported that the number of bookings in emerging markets was declining and that the Asia-Pacific region had fallen by 8%. While Cisco achieves less than 3% of its sales from China, business has "dramatically" declined there. Chinese state-owned companies and some telecom providers that used to use small amounts of Cisco machines have been sidelined due to the current trade tension.
These negative developments have hit Cisco shares hard: they have fallen by 17% since they reached a multi-year high of $ 58.26 in July, ending yesterday at $ 48.10. But despite this headwind, we still believe that Cisco shares are a valuable game for long-term investors and can be worth a gamble.
A solid world player
We derive our optimism from the solid global position of the company as a supplier of network equipment. While the cyclical nature of this hardware market segment can continue to hamper Cisco's inventory performance, it is difficult for companies to postpone their investments indefinitely for products that are so critical to their technical infrastructure.
Another reason why we are rather optimistic about Cisco is the aggressive diversification of the company, away from hardware to a software-driven model within new fast-growing areas of the market, such as cyber security and applications.
Under Chief Executive Officer, Chuck Robbins, Cisco has made a series of acquisitions to build a software and services company. In August, it announced plans to purchase closely held Voicea, a software maker that offers real-time transcription and voice search capabilities. In July, it agreed to purchase Acacia Communications Inc. (NASDAQ 🙂 for around $ 2.6 billion, which provided chips and machines that help translate optical signals into electronic data.
These growth initiatives, coupled with the company's dominant position in the region of America, where it generates the majority of its sales, have positioned the company to perform better when the macroeconomic risks decrease. . In addition to growth, Cisco is also a reliable company that regularly pays dividends, making it an attractive option for those who want to earn a growing income.
With its current annual return of around 3%, investors get $ 0.35 per share, which has increased by 14.20% per year in the last five years.
Bottom Line
Cisco is a company that wants to achieve strong growth because it benefits from a good mix of recurring revenues from its old operations and its focus on new areas with high margins. We believe that every post-earning weakness on Wednesday must be seized to purchase this quality stock.
