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Cisco Stock Price has Limited Downside Despite Soft Guidance

Cisco stock price

Cisco (NYSE: CSCO) stock price lost significant value in the past couple of months after hitting an all-time high of $58. CSCO shares extended the selloff after in-line first-quarter results and soft outlook for the current quarter. Some market pundits believe the dip is presenting an attractive entry point for long-term investors.

Bears argue macroeconomic headwinds along with sluggish top-line growth could hinder the upside potential. However, analysts expect limited downside for Cisco stock price.

Piper Jaffray is among the firms that anticipate a limited downside for  CSCO shares despite providing Neutral ratings. The firm says, “There’s a “slowing macro environment across Enterprise and Service Provider, and it will take product orders time to recover after peaking three quarters ago. But the downside to the stock is “fairly limited” for now.”

CSCO Cisco Systems, Inc. daily Stock Chart

First Quarter Results Are Strong

The company has generated solid financial numbers for the first quarter. Its revenue grew 2% year over year to $13.2 billion. Cisco has been experiencing improvement in software subscription revenue over the past couple of quarters. Software subscription revenue now accounts for 71% of its software revenue.

It has also experienced improvement in margins and earnings. The non-GAAP earnings per share grew 12% to $0.84 per share.

The cash generation remains strong enough to cover cash returns. Its operating cash flows of $3.8 billion in the first quarter adequately covered $2.3 billion of cash returns to shareholders in the form of share buybacks and dividends.

Soft Guidance Could Hinder Cisco Stock Price Performance

The company has presented a lower than expected outlook for the second quarter. It forecast revenue to decline by 3% from the previous year period. The earnings per share are likely to stand in the range of $0.75-$0.77, down from the consensus for $0.79. The company blames macroeconomic headwinds for negative revenue growth. Overall, cash returns are safe, but the Cisco stock price could remain under pressure amid sluggish growth.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.