Should You Buy This Stock on its Post-Earnings Dip?

Headquartered in San Jose, Calif., this well-known technology company designs, manufactures, and sells internet protocol-based networking and other products related to the communications and information technology industry. The company’s total revenue increased 8.1% year-over-year to $12.90 billion for its fiscal first quarter, ended October 30, 2021. However…

Cisco Systems’ (CSCO – Get Rating) revenue missed the consensus estimate marginally. While its net income increased 37.1% year-over-year to $2.98 billion, its EPS came in at $0.70, up 37.3% year-over-year.

CSCO’s shares have declined 3.8% since the results were reported on November 17, to close yesterday’s trading session at $55.30. This is primarily because due to the company’s tepid guidance provided by the company. CSCO expects $0.64 – $0.68 per share in profit, or $0.80 – $0.82 on an adjusted basis, for its fiscal second quarter.

Nevertheless, hedge funds have grown more bullish on the stock. Also, consistent improvements in the Internet of Things (IoT) and 5G are expected to boost CSCO’s growth prospects.

Here is what could shape CSCO’s performance in the near term:

Positive Developments

On November 16, DISH Network Corporation (DISH) and CSCO collaborated to sell cloud-powered 5G services to businesses. DISH is expected to use CSCO’s equipment to build its network and jointly invest in building a structure to deliver private 5G services to businesses.

Also, CSCO announced significant innovations across its Webex ecosystem at its WebexOne 2021, held last month. The company unveiled a preview of its next-generation hybrid work collaboration product, Webex Hologram, at WebexOne. In addition, CSCO announced its partnership with COP26, to provide connectivity across the whole venue.

 

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Favorable Analysts Estimates

Analysts expect CSCO’s revenue to increase 5.8% in its fiscal year 2022 and 5.3% in fiscal 2023. The company’s EPS is expected to grow 6.2% in the current year and 7.9% next year. Also, its EPS is expected to grow at a 6.6% rate per annum over the next five years. Wall Street analysts expect the stock to hit $64 in the near term, which indicates a 15.7% potential upside.

Reasonable Valuation

In terms of forward non-GAAP P/E, CSCO’s 16.15x is 34.4% lower than the 24.61x industry average. And the stock’s 4.10x EV/S is 3.9% lower than the 4.27x industry average. Furthermore…

 

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