Networking gear makers were sharply lower on Thursday after releasing a weaker sales forecast for its current quarter. The warning sent stocks of other networking companies to the bottom.
Cisco (Ticker: CSCO) says it expects revenue quarterly to fall between 1% and 5.5% year-on-year. Wall Street estimated growth of about 6%. For fiscal year, Cisco said it expects revenue to grow between 2% and 3%, down from the previous forecast of 5.5% to 6.5%.
Cisco shares fell 10.5% to $ 43.30 on Thursday. Coming to the session, the stock has fallen 23.7% this year.
Cisco said supply in the third quarter of the Covid-19 lockdown in China was so disrupted that it failed to meet customer demand. CEO Chuck Robbins told analysts that he did not expect Cisco to be able to capture the current quarter.
Chief Financial Officer Scott Herren insisted Baron’s The deficit of the company’s full-year outlook was entirely towards supply. “We don’t see any weakness in demand,” he said.
Analysts at Evercore said the biggest concern among investors was the “slowdown in order”, noting that order growth was 8%, up from 33% in the previous quarter.
Evercore said Cisco’s supply issues “surround mis-editing, which, while frustrating, should prove to be short-lived for the company.”
Analysts added, “Some missteps here could create a more positive growth scenario for FY23 as comparisons become easier and the supply chain begins to improve.” Evercore has an outperform rating on Cisco shares and a target price of $ 50.
Cisco has a cell rating with a price target of $ 40, less than $ 45. Analysts said in a research note that while supply-chain issues have affected many companies, “it seems Cisco has been more affected than others.”
Citi added that “Cisco has far more products than its peers, which is beneficial for customers when there is adequate supply but at the moment such complexity is a negative.”
(JNPR) down 3.5%,
(AVGO) is down 2.3%, and Arista Networks (ANET) is down 1.1%.
(CIEN) fell more than 2.6% on Thursday.
Write to Joe Welfel at [email protected]