As noted by Barron’s, Cisco Systems (CSCO) will be one of the first technology companies, which will report on financial performance, which will include the results for the April — the first full month for which the strike took COVID-19 for the economy.
Cisco will report quarterly results on Wednesday, may 13, after the market closes, after which the company's management will hold a conference call with investors and analysts.
In February, when an outbreak of coronavirus were considered technological sector mainly as a problem for Asian supply chain and demand in China, Cisco predicted that its revenue will decline by 1.5 - 3.5% in the third quarter of 2020 financial year of the company ending in April, compared to the same period of the previous year. This implied a range of $12.5 to $12.8 billion Profit forecast in the range of $0.79 to $0.81 per share.
But no one on wall street believes that the previously announced forecast is achievable. Analysts ' average forecast assumes that the company, which manufactures network equipment and software, reported revenues of $11.88 billion and net profit of $0.71 per share. For the current quarter ending in July, analysts predict $12.07 billion and $0.71 per share, respectively.
The main challenge for the company in the reporting quarter is a balance between the increasing demand for home networks and equipment for cloud computing and lower corporate expenses.
At RBC Capital Robert Mueller (Robert Muller) wrote in its report that the last quarter for Cisco, likely to be mixed. «We believe consensus expectations are justified, however a wide range of possible outcomes, [and] forecasts, given the uncertainty associated with Covid-19».
Mueller expects that in the short term sale of the business, specializing in enterprise campus networks will be reduced, because, in light of the macroeconomic uncertainty, companies will be cautious in planning expenditures. But he also claims that Cisco may win if the caution will encourage customers to trusted companies that can provide a full Suite of networking solutions. Mueller confirmed the rating of the Cisco stock at the level of «Outperform» and a target price of $47/share.
The analyst Evercore ISI Daryanani Amit (Amit Daryanani) on Monday also confirmed the rating of the Cisco stock at the level of «Outperform» with a target price of $50/share, but lowered its assessment of the financial performance of the company, based on a recent review of the company's competitors, Juniper (JNPR) and Arista Networks (ANET) about the limitations of the gradually increasing supply and reducing corporate expenses. He believes that the favourable factor for the company is that the shift to remote work will increase the cost of expanding possibilities of interaction in the network, as well as increased demand for solutions to ensure security and collaboration. «We still look positively on Cisco shares, as we believe that the company has all opportunities to overcome the current recession», — he said.
Barclays analyst Tim long (Tim Long) confirmed the rating of the Cisco stock at the level of «Overweight» and a target price of $48/share, but noted that his assessment of the main indicators for the current quarter well below consensus — $11.4 billion for revenue and $0.63 per share for profit. According to him, recent estimates mainly reflect serious disruption in business activities due to the coronavirus. However, he added that «sees some drivers, which may partially offset the negative impact of Covid-19», including the statements of executives about the build-up of physical equipment to ensure working conditions in the remote mode. «This is to support Cisco in the long term, and also provide some compensation for macroeconomic pressures in the short term», — notes long.
At the moment, shares of CSCO traded at $44.04 (+1.65%).
Information-analytical Department TeleTrade