Do you ever wonder how you are able to just turn on your computer and, with the click of a button, magically search the world wide web? Or how your conference call system works at your office? Most likely, Cisco Systems, Inc. (NASDAQ:CSCO), the company that designs and manufactures networking equipment, is the answer. The networking company recently reported a big drop in sales during its second quarter and it has some analysts ready to head for the side-lines with a HOLD recommendation. However, other analysts understand the drop and are still recommending BUY Cisco Systems, Inc. (NASDAQ:CSCO).
Following the announcement of disappointing sales, Jefferies analyst George Notter recommended HOLD Cisco Systems, Inc. (NASDAQ:CSCO). Cisco reported that sales totaled $11.2 billion, a decline of almost 8% from the same time last year, with a 55% drop in profit. George noted, “As expected, Emerging Markets, Service Provider, and high-end Routing/Switching product transitions negatively impacted fiscal Q2 results…Product margins were particularly affected by top line weakness.” George chose to recommend HOLD Cisco Systems, Inc. (NASDAQ:CSCO), “[remaining] on the sidelines with respect to the stock given the still-choppy IT spending environment.” George is ranked 1427 out of 2387 with a -0.2% average return over S&P-500.
On the other hand, these numbers did not scare Goldman Sachs analyst Simona Jankowski and, instead of HOLD, she recommended BUY Cisco Systems, Inc. (NASDAQ:CSCO). Simona argued, “Based on our analysis (using assumptions shown in the body of this note), we estimate that the volume decline likely accounted for the largest part of the margin shortfall, which implies that margins will largely recover as volumes ramp with Cisco’s switching and routing product cycles in 2H CY14.” Simona also added, “Positively, Cisco Systems, Inc. (NASDAQ:CSCO) more than offset the lower gross margin with lower opex, resulting in slightly higher net income, which was boosted by much greater than expected buybacks ($4bn vs. GSe $1bn) to drive $0.01 of EPS upside.”
Simona recommended BUY Cisco Systems, Inc. (NASDAQ:CSCO) in November of 2013. She maintained her BUY rating “on valuation” and ended up earning +6.2% over S&P-500. Simona is ranked number 64 out of 2387 analysts and has a 3.7% average return over S&P-500.
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