Cisco Systems Stock Price Could Extend the Bearish Trend; Here is Why

Cisco Systems (NASDAQ: CSCO) stock price plummeted sharply after featuring a lower than expected financial outlook for the first quarter. Analysts claim that CSCO is unlikely to create a significant bullish trend in the coming days. They have trimmed price targets and ratings for Cisco stock price.

CSCO Cisco Systems, Inc. daily Stock Chart

Cisco Systems stock price slashed from 52-weeks high of $58 to $45 after strong Q4 earnings but lower than expected guidance for the first quarter. The stock continues to trade below $50 level over the last month.

RBC Capital Markets dropped its target from $64 to $53, citing slowdown in the global environment. Piper Jaffray cut its price target to $55 from $58, saying the company can handle the macro challenge.

Needham, on the other hand, is more pessimistic about future fundamentals. Needham analyst Alex Henderson said, “Macro conditions are rolling over and that declines in SP and Enterprise are clear warnings. Many of Cisco’s recent strong points are waning.”

Cisco expects first-quarter revenue growth in the range of 0% to 2% compared to the consensus estimate for $13.41B. The company expects earnings per share between $0.80-$0.82, below from the analyst’s consensus estimate for $0.83 per share.

We continue to transform our business model with software subscriptions now at 70% of our software revenue. The returns on our investments in key strategic areas position Cisco for long-term growth and shareholder value,” Kelly Kramer, CFO of Cisco.

The company also plans to expand its revenue growth through acquisitions. It has recently completed its acquisition of voice-data firm Voicea. The company seeks to add Voicea’s solution into its Webex portfolio.

It has also acquired CloudCherry to enhance its Contact Center portfolio. CloudCherry offers customer journey mapping, predictive analytics, and rich survey capabilities for contact centers.

Its dividends are also safe despite headwinds. The company expects to generate cash flows in the range of $15 billion, which would be more than enough to pay an annual dividend of $6 billion.

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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.

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