Cisco is one of the largest technology companies in the world, with a market capitalization of more than $224 billion. The company generates annual revenues of almost $50 billion and an EBITDA of more than $15 billion.
This year, the company’s stock has gone up by 22%. However, in the past one month, the stock has declined by almost 10% as shown below.
The company, which was started in 1984 is one of the most-recognized brands in the IT industry. Many investors classify it as an ‘old-tech’ company, together with the likes of Apple, International Business Machines (IBM), Oracle, and Microsoft. This is because these are old technology companies that dominated the past few decades.
The company is known for its networking products like routers and switches. At some point during the dot com bubble, the company was the most valuable company in the world with a market cap of more than $500 billion.
In recent years, Cisco has made some major changes to its business. While it does a lot of networking services, the company has ventured into other areas of IT. As such, it has divided its business into Infrastructure Platforms, Applications, Security and Products.
These products are aimed at addressing the most challenging issues in the world today like the need for cloud computing, data centers, communications, and internet of things (IoT). In fact, like many IT companies, Cisco has introduced a number of subscription services.
Criticism by analysts
Still, the company has been criticized heavily by analysts. First, the company has failed to deliver products for the telecommunication industry. This means that it has failed to deliver capabilities that are essential for the ongoing migration to 5G. This has left the industry to be dominated by the likes of Huawei, Ericsson, and Nokia.
Second, the company’s subscription services have not grown fast enough.
The company will be watched closely this week when it releases its earnings. It will release them on Wednesday, shortly after the markets close in Wall Street. Investors expect the company to generate more than $13.39 billion in revenue and an EPS of $0.82.
In the last quarter, the company had revenue of more than $12.96 billion and an EPS of $0.78. It has beat the revenue and EPS forecasts in all the earnings since 2014 as shown below.
The recent declines has happened as investors worry about the company’s growth. This is mostly because investors expect the global IT spending to soften in the coming days.
In a recent report, analysts at Nomura said that multiple datapoints have shown that there is a risk for a global macro slowdown, which would be a major headwind to the company’s top line and earnings.
While the company reiterated its resiliency in the past earnings call, it is difficult to gauge how resilient the company will be. In fact, the company’s competitors like F5 Networks have warned of the growing risks.
Another major risk for Cisco is China. With the US being in a trade war with China, Cisco could face major headwinds in the country.