Tech Trader Daily has the roundup:
Cisco Systems (CSCO) shares are down about 9% following yesterday’s lackluster July quarter earnings report - and disappointing guidance for the October quarter. CEO John Chambers talked extensively on the post-earnings call about the “unusually conservative” and “cautious” comments he has been hearing from customers in recent weeks; Cisco’s customers are worried about the the strength of the economic recovery. And now we all get to worry right along side them. At the same time, Cisco says it intends to continue to invest on its own business, and in fact has been hiring up a storm; while that’s good if you happen to be looking for a job, and can be viewed as a showed of confidence, to some on the Street it is going to look like they aren’t paying enough attention to costs at a time when the company is seeing pressure on gross margin from higher component costs.
There are still plenty of Cisco bulls around, but their number is down a bit from 24 hours ago. Here’s a sample of some of the Street’s commentary on the stock this morning:
- Tim Long, BMO Capital: He cuts his rating on the shares to Market Perform from Outperform, slashing his target to $23, from $32. “Cisco reported July quarter results that were roughly in line and provided slightly lower guidance for October,” he writes. “We are concerned that the macro uncertainty will weigh on revenues, and the stock, over the next few quarters. Gross margins have been weak owing to component shortages, but competition is also increasing and the mix is shifting. Management is continuing to add to headcount, which is risky given the mixed signals that it is getting from customers. So we have concerns on both the top and bottom lines.”
- Ittai Kidron, Oppenheimer: He downgrades the stock to Perform, from Outperform, and withdraws his old $32 target. “We’re concerned with management’s commentary suggesting a choppy and more gradual recovery with increasing [calendar 2010 second half] spending uncertainty from its large customers,” he writes. “Cisco’s margin decline (impacted by supply chain, mix and competition) also is a growing concern. These will likely weigh on the shares. We don’t expect the business environment will get worse, but at the same time we believe the economic and spending environment won’t get much better either. We believe the shares are likely range-bound and as such we find it appropriate to step to the sidelines until a clearer direction is established.”
- Mark Sue, RBC Capital: He maintains his Top Pick rating on the stock, but cuts his target to $28, from $33. “The outlook remains uncertain and a lack of specific news during August may point to a choppy tech tape, particularly as linearity becomes more of a focus,” he writes. “For long-term minded
investors, we recommend Cisco in a balanced tech portfolio.”
- Brian Modoff, Deutsche Bank: Keeps his Buy rating, but cuts target to $28, from $32. “Management repeatedly pointed out that they are executing on all cylinders on things within their span of control – sales, new product launches, supply chain management, etc.,” he writes. “However, they sent clear signals that factors beyond their influence, i.e. macro conditions and business sentiment are adding incremental uncertainty to their customer spending patterns.”...MORE