Why CSCO Stock Could Be Dead Money

by Tom Taulli | November 13, 2013 4:46 pm

Since its weak fourth quarter results — announced back in mid August — Cisco (CSCO[1]) stock has lost about 10% of its value. Unfortunately, things have not gotten much better, as seen with the latest Cisco earnings report.

cisco earnings csco stockIn after-hours trading, CiSCO stock is off over 3% to $23.20.

The bar was already set low for the quarter. Wall Street was looking for Cisco earnings of 51 cents per share on revenues of $12.35 billion. While the company was able to post adjusted profits of 53 cents per share of CSCO stock, the revenues only came to $12.1 billion.

Those numbers from the Cisco earnings report translate to mere 2% sales growth and a drop of 5% for earnings per share of CSCO stock.

CSCO Stock Could Be Stuck

To help bolster things, the company announced plans to repurchase around $15 billion of Cisco stock.

But Wall Street wants to see growth — and Cisco earnings sure did not provide encouraging evidence for CSCO stock investors that it can get back into gear.

Not even the acquisition strategy is having much impact on CSCO stock. Cisco has struck several deals for companies like Sourcefire (cybersecurity), Composite Software (smart devices), WhipTail (datacenter automation), Meraki (cloud-based WiFi systems) and SolveDirect (cloud services). But so far, they have not moved the needle much — definitely not enough to please Cisco stock investors.

All in all, it looks like the IT (information technology) spending environment continues to be soft. And CSCO is not the only one suffering from that reality. Other companies like IBM (IBM[2]) and Oracle (ORCL[3]) have felt the pressure as well.

It’s true that Cisco stock is fairly cheap, at only 10 times forward earnings. The dividend yield for CSCO is also an attractive 2.9%.

But without a spark of growth, Cisco stock could be dead money for a while.

Tom Taulli runs the InvestorPlace blog IPO Playbook[4]. He is also the author of High-Profit IPO Strategies[5]All About Commodities[6] and All About Short Selling[7]. Follow him on Twitter at @ttaulli[8]. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  2. IBM: http://studio-5.financialcontent.com/investplace/quote?Symbol=IBM
  3. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  4. IPO Playbook: https://investorplace.com/ipo-playbook/
  5. High-Profit IPO Strategies: http://goo.gl/TXQsz
  6. All About Commodities: http://goo.gl/FfP8R
  7. All About Short Selling: http://goo.gl/t5Jzb
  8. @ttaulli: https://twitter.com/ttaulli

Source URL: https://investorplace.com/2013/11/csco-stock-cisco-earnings/
Short URL: http://invstplc.com/1nxxSjz