Cisco Systems (CSCO) earnings: expect 3% revenue growth

Are you looking for the analysis of Cisco Systems, Inc. (CSCO) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 7 reasons to sell CSCO stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about CSCO stock:

• Is CSCO a buy or a sell?
• Should I sell or hold CSCO stock today?
• Is CSCO a good buy / investment?
• What are CSCO analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy CSCO stock:

1. The acceleration of the Internet of Things phenomenon puts Cisco in a position of strength, given its broad product lineup. The continuous investments in the field through its Cisco Investments arm have the potential to deliver outsize returns.

2. Cisco’s focus on web scale customers could increase the company’s footprint in this rapidly growing market.

3. The ongoing gradual increase in share of revenue derived from services will accelerate as Cisco pushes further into software, cloud, and analytics.

4. Cisco is the largest player in the networking space. The company has a strong
presence in the router and switch market. It also retained a leadership position in WLAN
and Ethernet switching.

5. Cisco’s focus on wireless carriers has increased of late, as evidenced by acquisitions
such as Intucell, BroadHop, Cognitive Security, Cariden, ClearAccess and Ubiquisis.
With data demand exploding, the wireless carrier segment has grown in importance.
Mobile carriers in the U.S. are increasingly looking to make their networks more
spectrum-efficient and put their network resources to use without having to materially
increase capex expenditure.

6. In order to counter the threat of SDN, Cisco has devised a strategy of its own, which it is referring to as Application Centric
Infrastructure (ACI). ACI is a comprehensive approach that ties together physical and virtual compute, network and storage by
leveraging centralized policies and orchestration. ACI is made up of new hardware in the Nexus 9000 portfolio and software in the
shape of an updated NX-OS operating system along with the Application Policy Infrastructure Controller (APIC), which is the
centralized point for managing, monitoring and programming the ACI.

7. The company has pioneered a network system, which has been referred to as the Unified Computing System (UCS). This is a
revolutionary blade server system based on x86 architecture that is transforming data centers. The system lowers the cost of
ownership by making the entire data center more network-centric, significantly reducing the number of computers/servers required.

8. Cisco has inked strategic alliances with most of major technology companies globally. These partnerships have increased access to
new technology, helped in developing innovative products, facilitated joint sales & marketing programs, and expanded total
addressable market (TAM). The company has strategic partnerships with Apple, IBM, Microsoft, Viacom, Telenor, Google and
Alibaba. We believe partnerships will help Cisco in winning new customers in the long haul.

9. CSCO forward dividend yield is 2.59%, higher than the industry (0.28%) and sector (0.23%) forward dividend yields. See CSCO forward dividend chart.

10. CSCO average analyst rating is Buy. See CSCO analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell CSCO stock (i.e., the bear case):

1. The growing adoption of network virtualization tools will increase gross margin pressure from commodity manufacturers in the LAN switching segment. This market is mature and undergoing commoditization.

2. The emergence of Chinese network equipment design and manufacturing firms Huawei and ZTE will affect Cisco revenue and margins in APJC and, to a lesser degree, in the EMEA region.

3. The rapid growth of hybrid and pure cloud-based data centers will decrease market growth in the LAN switching segment. The need for premium switching equipment at the edge will further diminish.

4. Cisco continues to acquire a large number of companies. While this improves revenue opportunities, it increases integration risks.
Moreover, we also note that the large acquisitions negatively impact the balance sheet in the form of high level of goodwill, which
totaled $30.39 billion or almost 23.1% of total assets as of Jan 27, 2018.

5. Cisco has been forced to offer discounts and deals in response to actions by peers due to stiff competition. The company,
together with Juniper, serves almost 80% of the core router market and enjoys the second position in the market. Cisco‘s
competitors are revamping their product lines with faster and power-efficient products.

6. CSCO profitability is declining. The YoY profit margin change was -19.79percentage points. See CSCO profitability chart.

7. CSCO Price/Sales ratio is 4.81, and it’s high compared to its industry peers’ P/S ratios. See CSCO forward Price/Sales ratio chart.

Now let’s look at the key statistics for CSCO:

What are your thoughts on CSCO?

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