Why Investors Hit the Sell Button on Cisco Today
An earnings beat by Cisco Systems Inc (NASDAQ:CSCO) in its third-quarter results was not sufficient to undo the damage wrought by its gloomy comments on the outlook for subsequent quarters. Shares of the network equipment maker and IT bellwether tanked 10 percent in trading today in response.
Cisco remarked that visibility for the second half of the year was poor as customers fretted about the fallout from Europe, as well as the tough environment surrounding spending by government and corporations.
“The weak fourth-quarter guide is indicative of near-term macro-driven uncertainty in enterprise IT spending,” said Deutsche Bank analyst Brian Modoff. The company’s telepresence sales were adversely affected due to spending cuts by business and government.
Analysts are worried about the impact of Cisco’s comments on other companies in the sector, such as video-conferencing company Polycom Inc. (NASDAQ:PLCM), Juniper Networks (NYSE:JNPR) and Hewlett-Packard (NYSE:HPQ).
Brokerages responded by cutting their price outlook for Cisco’s stock – the mean price target for the stock is now $22.58.
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