Goldman Sachs Removes Cisco (CSCO) from Conviction Buy List

November 14, 2013 7:54 AM EST
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Price: $30.10 --0%

Rating Summary:
    32 Buy, 25 Hold, 2 Sell

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    Up: 19 | Down: 13 | New: 9
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Goldman Sachs removed Cisco (NASDAQ: CSCO) from its Conviction Buy List and cut its price target from $30 to $25 following Q1 results and weak Q2 outlook. The Buy rating was maintained.

Cisco reported F1Q (Oct) sales/non-GAAP EPS at $12.1bn/$0.53, vs. GSe at $12.4bn/$0.52 and the Street at $12.4bn/$0.51. It guided F2Q yoy sales decline of 8-10%, implying revenues of $10.9-11.1bn, well below prior GSe/Street at 6%/4%, and EPS of $0.45-0.47, vs. GSe/Street at $0.55/$0.52. Cisco also issued FY14 (Jul) non-GAAP EPS guidance of $1.95-2.05 vs. prior GS/Consensus at $2.19/$2.10.

"We are removing the stock from the Conviction List on reduced confidence in the near-term trajectory, though maintaining our Buy rating on valuation," analyst Simona Jankowski said.

It was added: "We estimate that a third of the 13pt shortfall in sales guidance was due to macro factors, such as the federal shutdown and emerging markets (EM), while two thirds was due to company-specific factors including a pause in demand ahead of new routing and switching products, share losses in the low end of the edge routing segment to Alcatel and Juniper, and sharp declines in the set-top box (STB) business.

The firm lowered FY14/15/16 EPS estimates to $2.00/$2.25/$2.35 from $2.19/$2.40/$2.61 on lower revenues, partially offset by higher margins.

For an analyst ratings summary and ratings history on Cisco click here. For more ratings news on Cisco click here.

Shares of Cisco closed at $24.00 yesterday.

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