Cisco (CSCO) Likely to Meet and Guide Down - Jefferies

Jefferies analyst, George Notter, notes that the risk/reward is getting better for Cisco (NASDAQ: CSCO) as the price drops but maintains his Neutral rating on fears of a guidance cut for the April quarter. No change to the $26 PT.

The Stock is Cheap. The shares currently trade for 6.7x calendar 2017 base business (ex-cash, ex-Interest Income) EPS projection. The multiple compares to an 8.1x average forward year EPS multiple for Cisco over the past 3 years. Moreover, the shares are currently at their absolute lows in terms of the multiple investors have been willing to pay for Cisco over the past 3 years.

Looking back at historical earnings power – specifically in times of macroeconomic uncertainty – it’s apparent that Cisco has been extremely effective at managing its profitability and EPS power. The analyst suspects the organization – on Wednesday – will acknowledge the difficult macro environment and take April quarter expectations down a shade relative to consensus.

The Macro Environment is Mixed – Some Incremental Fears on North American IT Spending… Brazil, Russia, and China continue to drag on suppliers’ revenue performance. Elsewhere, we’re starting to see some incremental commentary about softer spending trends out of the North American market. EMEA looks very strong.

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 $22.89 yesterday.

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