Cisco Stock: Strong Fundamentals And Resilience Make it a Buy


Cisco Systems, Inc. (NASDAQ: CSCO) is making headlines after the company announced plans to acquire Acacia $2.6 billion deal. The move will boost the company’s optical systems portfolio.

Cisco stock has increased by close to 30% in value year-to-date. Let’s see why Cisco stock should be bought.

J.J. Kinahan of TD Ameritrade recently said in an interview on CNBC that Cisco is a great stock to buy for long-term gains. The analyst said that Cisco is using its cash for dividends, stock buybacks, and acquisitions. The analyst also mentioned that Cisco is one of the most resilient stocks when seen in the context of U.S.-China trade war.

Cisco is expanding quickly and continuing its buying spree. In 2018, Cisco said it would buy cybersecurity firm Duo Security for $2.35 billion in cash and stock. Cisco will also buy semiconductor firm Luxtera for $660 million in cash and assumed equity.

Strong Fundamentals

Cisco’s fundamentals are strong. In May, the company posted a strong third quarter. EPS came in at $0.78, compared to the consensus estimate of $0.78. Revenue in the period came in at $12.96 billion, vs. $12.89 billion as expected by analysts. In the third quarter, Cisco bought back $6 billion in shares, while $18 billion in stock buybacks is remaining under the company’s buyback authorization.

Revenue in the quarter increased by 4%.

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For the fourth quarter, Cisco expects revenue growth between 4.5% and 6.5%.

Cisco is ramping up its software and services business. It’s also strengthening its security business, amid growing demand. According to an estimate, the cybersecurity market worth is expected to grow to $250 billion.

In the third quarter, Cisco Systems, Inc. (NASDAQ: CSCO) core segment, Infrastructure Platforms business, added $7.55 billion in revenue, crushing the $7.46 billion consensus estimate among analysts polled by FactSet. On the other hand, Cisco’s cybersecurity business, which also includes Duo Security, generated a revenue of $707 million, which is 21% better than the FactSet estimate.

Cisco Systems, Inc. (NASDAQ: CSCO) said that its Catalyst-9000 switches are being well-received in the market. Nomura Instinet’s analyst Jeffrey Kvaal said that the Cat-9000 switches are still in their early stages. The analyst cited a survey in which 11% of the respondents upgraded to the new switches, while 16% expect to do so in the next 12 months.

The author does not own any of the stocks discussed in this article.