Shares of Cisco Systems have languished over the past couple of years, as revenue growth at the networking giant slowed. But the company's latest quarterly earnings report could change investors' perceptions of company's prospects -- and its stock.
The stock (symbol CSCO), which is down more than 30% since January 2004 -- and 75% from its all-time high, set in 2000 -- surged 7% on Wednesday. The advance came after the release of better-than-expected earnings for the second quarter of Cisco's fiscal year.
Perhaps more important than the profit surprise, however, was word of surprisingly strong orders for Cisco's networking gear. "Order growth was the best the company had seen on over a year," says Oppenheimer analyst William Becklean. Increasing orders bode well for revenue momentum in the coming quarters.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Cisco had previously forecast that revenues would improve in the second half of its current fiscal year, which ends in July. But investors were skeptical, says SG Cowen & Co. analyst Christin Armacost. Now, she says, strong orders have set the stage for better growth, and the stock should climb higher over the next year, in her view.
Becklean also found the latest report encouraging and upgraded the stock from neutral to buy on Wednesday. More than likely, he says, he'll be raising his earnings estimates for Cisco in the coming months. "We believe the stock has made a bottom," he says.
Cisco dominates the market for routers, switches and other data networking equipment, and many analysts say that, given its increasingly broad range of products, including voice over Internet protocol (VoIP) and other advanced technologies, it's likely to continue to gain market share. It's also on the verge of completing its purchase of cable set-top maker Scientific-Atlanta. The deal is Cisco's largest acquisition ever, and Armacost says it should help make the company's offerings more appealing to service providers that are developing video-capable next-generation networks.
The stock, at $19, sells for 17 times the $1.11 per share that analysts estimate the company will earn in the 12 months ending January 2007.
--Lisa Dixon
-
Aging: The Overlooked Risk FactorSponsored Elder care is a personal and financial vulnerability many people fail to plan for.
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Stock Market Today: Stocks Slip After Powell Talks Rate CutsThe main indexes closed lower Thursday after Fed Chair Powell said there's no rush to cut rates.
-
Cisco Stock: Why Wall Street Is Bullish After EarningsCisco stock is lower Thursday despite the tech giant's beat-and-raise quarter, but analysts aren't concerned. Here's what you need to know.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
