Dow Jones Stocks to Sell: Cisco Systems (CSCO)
Cisco Systems (CSCO) was one of the high-fliers of the late 1990s. Since then, CSCO stock has become moribund and bordering on irrelevant — just like the Dow Jones Industrial Average!
Cisco’s latest earnings were pathetic. Revenues were down 7.8%, and net profit cratered by 54%. The Americas region, which was always CSCO stock’s reliable hitter, was poor. Service provider video was the worst segment, with revenue down 21.5% and actual orders down 20%. The order backlog is declining, too. Wireless was stagnant with a 1.8% decline in revenues. In fact, there was a sequential decline in order booking.
CSCO even admitted things stink, forecasting a revenue decline of 6% to 8% for the year, and flat to lower earnings.
It’s not like Cisco is going bankrupt, as it generates tons of FCF each year. It just isn’t growing, and investors pay for growth, not stagnation. At 11 times 2014 earnings, I say you can do better. If you want a cash flow play that pays more than CSCO stock’s 3.4% yield, go with AT&T (T).