Recently, Cisco won an important contract for the Verizon build-out of the company’s next-generation 100G metro network. While the optical business is a small part of total revenue, this win is seen by Wall Street as a significant endorsement of the investments Cisco has made into its optics business.
In terms of its stock repurchase plans and announcements, Cisco is a company that deserves kudos for clear communications in its earnings releases, as it spells out each time how many shares were bought and for what price, as well as showing what the cumulative tally has been over time.
As of January 24, 2015, Cisco had repurchased and retired 4.4 billion shares of its own common stock. It was also profitable, if you look at the average share price versus recent trading, as the average price for stock buybacks was listed as $20.73 per share, bringing the total buybacks to about $90.7 billion since the company began its stock buyback plan.
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John Chambers, who was the CEO of Cisco for 20 years, recently announced that there would be a changing of the guard. Chuck Robbins will take over the position at the helm of the world’s largest networking equipment company.
A few analysts weighed in on Cisco ahead of earnings:
- RBC Capital has an Outperform rating and raised the price target to $33 from $31.
- Pacific Crest raised Cisco to Overweight from Sector Perform.
- Raymond James has an Outperform rating and raised its price target to $33 from $30.
- Oppenheimer has an Outperform rating and raised its price target to $32 from $30.
The networking giant trades at a low 13.6 estimated 2015 earnings and has a strong 7.44% free cash flow yield. Cisco also seems to have fought through numerous headwinds, including up and down demand from telecom carriers, weakness in emerging markets and threats to its very lucrative switching business, all of which many top analysts feel are going away. The company also stands to benefit from a better corporate spending environment in Europe, as well as continued growth at home.
Cisco’s chart is in an interesting place. With the stock above $29, the 50-day moving average of $28.29 would seem to give strong support on the downside if the news is less positive. If there is somehow atrocious news, the 200-day moving average does not come into play until all the way down at $26.43 — and the past three waves of support were all at levels around that price or even higher. The other side of the chart is that Cisco shares have had a very hard time on rallies up to $30.00.
Shares of Cisco were up 0.3% at $29.33 in early trading Wednesday. The stock has a consensus analyst price target of $30.48. The 52-week trading range is $22.49 to $30.31.
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