Network Communications Giant Cisco Systems (NASDAQ:CSCO) the shares eventually sold off despite strong growth in revenue and net income. The world’s leading networking company is enjoying solid strength and double-digit annual growth despite its stock underperformance. The company has been a benefactor of the pandemic as more infrastructure construction was needed to meet data traffic and the demands of stay-at-home mandates. The pandemic reshaped the notion of an elastic office that continued to remain part of the new normal upon reopening. Cisco has not experienced any type of reversion with the reopening, instead the backlog continues to grow to a record $14 billion. Robust demand for its products topped 30% growth for its third consecutive quarter. Its enterprise division recorded order growth of 37%, the highest level in 12 years. Some materials and shipments have been delayed due to supply chain constraints that are expected to continue through fiscal 2022. The company has reduced its revenue guidance for fiscal 2022, which, as benchmarks sold off and interest rates rose, equities deflated. This offers downside buying opportunities for cautious investors, as the shares are trading at just 15.3 times forward earnings and an additional $15 billion has been cleared for its share buyback program.

Publication of results for the second quarter of fiscal 2022

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On February 16, 2022, Cisco released its second quarter fiscal 2022 results for the quarter ending January 2022. The company reported earnings per share (EPS) of $0.84 versus analyst consensus estimates. of $0.81, a beat of $0.03. Revenue rose 6.4% year-over-year (YoY) to $12.72 billion, beating analyst estimates of $12.67 billion. Non-GAAP margins were 34.3% compared to the previous guidance of 32.5% to 33.5% and up from 33.3% in the first quarter of fiscal 2022. Demand still robust led to total product order growth of more than 30% in the third quarter. Total ARR is up 11% year-over-year to $21.9 billion in the second quarter of fiscal 2022. The company increased the quarterly dividend to $0.38 per share and approved an increase of $15 billion from the share buyback program. Cisco CEO Chuck Robbins commented, “We continue to see incredibly strong demand in our portfolio, underscoring the criticality and relevance of Cisco innovation. Our strong backlog, record backlog and double-digit annual recurring revenue growth position us well to generate growth. »

Online guidance

Cisco released third quarter 2022 online EPS guidance of between $0.85 and $0.87 compared to analyst consensus estimates of $0.87. The company expects a 3% to 5% increase in revenue to between $13.19 billion and $13.44 billion, compared to analysts’ estimate of $13.29 billion. Fiscal fourth quarter non-GAAP operating margin is expected to be between $32.5 and 33.5%. The company expects full-year 2022 EPS to be between $3.41 and $3.46, beating analyst estimates of $3.42 and lowering revenue expectations to 5.5% to 6.5% , versus 5% to 7%, or $52.56 billion to $53.06 billion versus $52.75 billion. The company expects supply constraints to continue in the second half of fiscal 2022. Hybrid cloud and work solutions will be a key driver moving forward and customers are in first phases of purchasing new generation platforms.

Analyst Notes

Despite strong results, the company has seen a number of downgrades by analysts in the wake of lowering its revenue guidance. On March 10, 2022, Wells Fargo downgraded Cisco shares to equal weight from overweight with a target price reduction to $65 from $70. They noted that the backlog is peaking and the stock is likely to be constrained as it struggles to generate incremental revenue growth of more than 1.5% to 2%. Citigroup downgraded the shares to a sell on April 22, 2022, with a price target of $45. They cite that supply chain challenges are significantly hampering its ability to source parts as the competition takes market share.

Cisco Systems stock offers another downside buying opportunity

CSCO Opportunistic Recoil Levels

Using rifle charts on the weekly and daily frames provides an accurate view of the landscape for the CSCO stock. The weekly Rifle chart formed an inverse PUP breakdown with a descending 5-period moving average (MA) at $53.82, followed by the 15-period MA at $55.48. The weekly lower Bollinger Bands (BB) lie at $49.04. The weekly 200-period MA sits near $49.14 Fibonacci level (fib). The weekly stochastic inverted mini-pup leaned on the 20 band. The weekly weak market structure (MSL) buy triggers on the breakout of $55.89. The downtrend on the daily Rifles chart came to a halt with the 5-period MA rising at $51.86 and the 15-period MA sliding at $53.70. The daily Stochastic crossed the 20-band test. The daily 50-period MA stands at $54.83. Cautious investors can look for opportunistic pullback levels at the $52.05, $50.68, $50.20, $49.24, $47.95, $47.07, $46.37 and 45, $84. The upward trajectories range from the $57.37 fib to the $68.37 fib level.

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