Supply-chain worries and component shortages continue to play spoilsport for communication equipment providers, including Cisco Systems (CSCO). Despite the headwinds, Cisco again delivered impressive quarterly numbers. Its success came on the back of its transformation initiatives, which focused on driving its subscriptions and recurring revenues.
In response to the company’s solid quarterly numbers, Chuck Robbins, Cisco’s CEO, said that the “demand for Cisco technology is strong with our Q4 performance marking the highest product order growth in over a decade.” Notably, Cisco benefits from strong growth across its markets, while product orders remain elevated amid the ongoing digital transformation. (See Cisco Systems stock charts on TipRanks)
Besides for beating the Street’s estimates for Q4, Cisco issued FY22 guidance that was well ahead of the analysts’ expectations. (Read more: Cisco Reports Strong Q4 Results; Shares Drop 1.9%)
Management listed solid demand, lower order cancellation rates, strong pipeline, and expansion in IT budgets as key catalysts that could continue to fuel its growth. Cisco expects its FY22 revenues to be in the range of $52.3 billion to $53.3 billion, well above Wall Street’s estimate of $51.9 billion.
Despite the positives, Cisco failed to ignite investors’ confidence. Its stock is trading 1.5% lower in Thursday’s pre-market. Moreover, TipRanks’ Stock Investors tool shows that investors currently have a Very Negative stance on Cisco, with 1.6% of investors who hold portfolios on TipRanks having decreased their exposure in the last 7 days.
Investors’ apprehension could be stemming from the uncertainty related to the supply chain. While Cisco sees increased demand, it expects “supply challenges and cost impacts” to persist for another year.
Echoing a similar sentiment, Jonathan Ruykhaver of Robert W. Baird said, “supply chain challenges remain top of mind and will persist into FY22.” However, the 5-star analyst termed Cisco’s FY22 revenue guidance as a “pleasant surprise.”
Ruykhaver maintained a Hold rating on Cisco. However, he increased the price target to $58 (5.2% upside potential) from $53.
On TipRanks, CSCO is a Moderate Buy, based on 7 Buys and 7 Holds. The average Cisco Systems price target of $56.08 implies approximately 1.7% upside potential to current levels.
Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
