Cisco Systems had a decent quarter, surpassing expectations, but its future guidance failed to excite the market. Nevertheless, income investors have seized the opportunity to buy the dip, revealing optimism in the company’s long-term potential.
The stock’s recent decline has lured value-minded investors who are attracted to the company’s strong cash flow, healthy dividends, and affordable valuation. Trading at 13.5X earnings, Cisco is considered one of the most cost-effective tech stocks on the market, offering an above-average yield.
Cisco’s Mixed Quarter and Shift to Subscription Model
Cisco Systems encountered challenges in its recent financial quarter. Despite a 5.9% decline in revenue, the company outperformed consensus expectations. While its core networking business suffered, other segments, such as services, displayed growth. Notably, subscriptions and recurring revenue have shown promising upticks in the Services segment.
Moreover, Cisco’s ability to improve its gross margin across all segments and control costs resulted in adjusted earnings per share of $0.87, exceeding forecasts by $0.03.
Cisco Systems’ Support and Technical Outlook
Institutional investors have displayed a shifting stance, moving from a bearish outlook to a bullish one, indicating potential for a rebound later in the year. Institutions currently hold about 72% of Cisco’s shares, signaling a long-standing belief in the company’s potential.
While the technical outlook appears mixed, with strong support near $48, it is unlikely to see a sustained rally until later in the year. Investors can anticipate the stock to remain range bound, with resistance likely around $50 and $55, but can count on Cisco’s dividends and repurchases to continue adding value to their portfolios.