Cisco Systems Inc., a prominent network equipment and software company, is gearing up to unveil its fiscal fourth-quarter earnings report on Wednesday after the market closes. Investors are eagerly awaiting the results to assess the company’s progress towards achieving seasonal order growth, primarily driven by software sales, as well as its efforts to reduce inventory.
Positive Forecasts supported by Channel Checks
According to Raymond James analyst Simon Leopold, his channel checks indicate that Cisco’s forecast is on track. He further anticipates year-over-year growth, particularly in the second half of fiscal 2024. Leopold maintains an optimistic outlook on Cisco’s future, citing various factors such as improved order flow, the conversion of its backlog, and enhanced annual recurring revenue (ARR) growth through software sales. ARR serves as a significant metric for Software-as-a-Service (SaaS) companies, illustrating the expected revenue based on subscriptions.
Analyzing Investor Sentiment and Concerns
Despite a positive outlook, Leopold acknowledges mixed investor sentiment. There is an increased interest in artificial intelligence (AI) optimism, alongside improved second derivative outcomes on orders. Nevertheless, concerns persist regarding potential share loss and sales declines.
Examining Enterprise Orders and Inventory Drawdowns
Thomas Blakey, an analyst at KeyBanc, holds a sector weight rating on Cisco. He expects the company’s financial results to be in line with expectations. However, he highlights the recent lag in enterprise orders as a crucial aspect to monitor. Additionally, Blakey looks to gain insights into inventory drawdowns, a challenge faced by many tech companies since last year.
Stay tuned for Cisco Systems Inc.’s fiscal fourth-quarter earnings report to gain a comprehensive understanding of the company’s growth trajectory and inventory management strategies.
Cisco’s Outlook: A Mixed Bag
Analysts are closely watching the order rate improvement and backlog drawdown in Cisco Systems Inc. (CSCO) following reports of increased drawdown and order rate softness in certain verticals. Atif Malik from Citi Research is keeping a positive catalyst watch on the company, though he views it as a mixed bag.
Despite facing market share challenges in switch/security end markets and lower relative cloud exposure, Malik expects Cisco to outperform its peers, Arista Networks Inc. (ANET) and Juniper (JNPR), due to strong enterprise demand. However, the analyst maintains a neutral rating on Cisco.
Analysts surveyed by FactSet predict fourth-quarter earnings of $1.06 per share on revenue of $15.05 billion, representing a 14.9% increase compared to the previous year. Out of 27 analysts covering Cisco, 11 have buy-grade ratings, 15 have hold ratings, and one has a sell rating. The average target price is $55.84.
As of year-to-date, Cisco shares have risen by 12.9%, outperforming the Dow Jones Industrial Average (DJIA) which has seen a 6.4% increase. This performance falls short compared to the S&P 500 index (SPX) with a gain of 16.3%, and the tech-heavy Nasdaq Composite (COMP) with a rally of 30.4%.
