Cisco Systems (NASDAQ:CSCO) recently released its quarterly report, exceeding analyst expectations but still facing a drop in revenue and profits. Despite 54% of its revenue coming from subscription services, Cisco struggled due to customers being overloaded with products yet to be installed, leading to decreased orders in previous quarters. However, there is hope as product ordering trends have improved, with total product orders up 4% year over year in the third quarter.
While revenue is expected to decline in the fourth quarter, Cisco anticipates a rebound in product orders once customers complete installations by July. Looking ahead to the next fiscal year, Cisco’s revenue is expected to perform better due to these improvements in product orders.
Regarding its stock, Cisco has a price-earnings ratio of around 13, with adjusted earnings per share expected to be between $3.69 and $3.71 in the current fiscal year. Despite facing competition, particularly from Arista Networks, Cisco remains the dominant player in the switching and routing markets. The company’s earnings may experience slow growth on average, but its valuation remains attractive for long-term investors, aided by a 3%-plus dividend yield.
Although Cisco may not break into the S&P 500 Index, it presents a decent long-term investment opportunity for those seeking steady returns. Considerations before investing in Cisco include the potential for slow growth and competition in the market.
For those interested in investing $1000 in Cisco Systems, it is advisable to evaluate other stock picks as well. The Motley Fool’s Stock Advisor service offers guidance on building a portfolio, with two new stock recommendations each month. While Cisco was not among their top 10 stock picks, the service has outperformed the S&P 500 since 2002.
In conclusion, while Cisco Systems faces challenges such as competition and potential slow growth, its stock presents a promising opportunity for long-term investors at a reasonable valuation. Investors should weigh the company’s prospects against other investment options before making a decision.
Timothy Green has no position in any of the mentioned stocks, but The Motley Fool recommends Arista Networks and Cisco Systems. The Motley Fool has a disclosure policy.
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https://finance.yahoo.com/news/cisco-stock-buy-slumping-last-093500800.html
