After its latest downbeat forecast, Cisco Systems Inc. is firmly in Wall Street’s penalty box, and analysts had some harsh words for the networking giant. Cisco
customers are currently digesting their recent purchases, a trend that’s pressuring new-order momentum such that the company slashed its full-year revenue forecast alongside its Wednesday afternoon earnings report.
“Frankly, we find it challenging to push our revenue estimate down as much as they have guided,” Needham analyst Alex Henderson wrote, noting that by his math, networking could be down more than 20% in the fiscal second quarter, down 15% in the fiscal third quarter, and down at least 5% to 10% in the fiscal fourth quarter. “We think these numbers cement our view that Cisco is losing share in its core business,” Henderson added. The company’s comments suggest to him that the services business is growing, “which in turn implies a decline in product sales that’s even steeper than the revenue guide.” He has a hold rating on the stock, which was off nearly 10% in Thursday’s premarket trading. Opinion: Cisco’s brutal forecast shouldn’t end the tech sector’s party William Blair’s Sebastien Naji was also cautious. “While the stock in not expensive and Cisco is an execution machine, we believe the company’s strategic shortcomings are becoming more visible, which will make upside to estimates and multiple expansion more challenging in the future,” he wrote, while sticking with a rating of market perform. “Building tailwinds around generative AI will benefit Cisco, but even here continued competitive pressure…could limit upside potential.” Naji said that the “deployment-related pause in spending may be a contributing factor” to decelerating order growth, though “increased competition and market share losses across a number of product segments are also to blame,” …