Cisco Systems, Inc. (NASDAQ:CSCO) is, without a doubt, one of the giants of the stock market and rightly so considering its status as one of the biggest players in the network equipment market. However, the stock has not performed well over the past year and has, in fact, lost 30% over the past 52 weeks. In such a situation, it is perhaps worthwhile to figure out whether the Cisco stock is a stock worth looking at or not.
Earnings Put Pressure
The poor performance of its stock can be attributed largely to its second-quarter financial report that proved to be quite modest. Adjusted earnings rose by 6% year on year, but the company’s sales fell by as much as 4%.
The second-quarter numbers may have been in line with analysts’ estimates, but those estimates had been set after the disappointing projections from Cisco. The company stated that currently, it is struggling in many of its target markets due to extraneous matters. The company cited Brexit and the American-Chinese trade war as two of the major factors.
Those two factors brought in certain macrocosmic changes that affected Cisco’s growth. However, the company did not seem to think that the coronavirus epidemic is going to be a factor in its earnings in the third quarter.
That being said, it should be noted that as the virus spread, it did have an impact on the Cisco share price, and hence, it is clear that investors believe that the epidemic could have an impact on the company’s growth. Hence, analysts believe that the company might issue a lower projection for the third quarter if the coronavirus epidemic continues to be an issue worldwide. However, it should be pointed out that the company is currently going through a shift in strategy. It is looking to move away from the low margin business of networking hardware and step into software and services.
That could boost profits significantly, and the global launch of 5G could also prove to be another massive opportunity. Hence, investors who have a longer-term outlook could still consider CSCO as a stock to watch at this point.