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Category: Stock Market and Cisco Systems
Date: 14 May 2020 Stock Price: $41.95 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of Cisco Systems, one of the leading internet and related products companies in the world.
During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future," said Chuck Robbins, chairman and CEO of Cisco " |
About Cisco Systems
Cisco (Nasdaq: CSCO) is the worldwide technology leader that has been making the Internet work since 1984. Our people, products and partners help society securely connect and seize tomorrow's digital opportunity today.
Overview of Cisco Systems 3rd quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise:
- Revenues: $11.983 billion (down from $12.985 billion for the same quarter of the previous year)
- Revenue decreased by -7.5% over the last 12 months
- Cost of sales : $4.212 billion (down from $4.785 billion for the same quarter of the previous year)
- Cost of sales decreased by -11.97% over the last 12 months
- Some margin gain for Cisco with their revenues declining at a slower rate than their operating expenses
- Net income $2.774 billion (down from $3.044 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.65 (down from earnings of $0.69 for the same quarter of the previous year)
- PE ratio of Cisco : 17.1
- Diluted weighted-average shares outstanding: 4.245 billion (down from 4.415 billion for the same quarter of the previous year)
- Cash and cash equivalents: $10.366 billion
- Cash and cash equivalents per share: $2.44
- Cash and cash equivalents makes up 5.96% of Cisco Systems market capital
- Cash and cash equivalents makes up 11.34% of Cisco Systems total assets
- Stockholders equity in Cisco Systems: $35.708 billion
- Stockholders equity per share: $8.41
- So Cisco syems is trading at 4.9 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.7 times. Read more about the S&P500 here
- Cash generated from operations for the 9 months: $11.624
- Cash generated from operations for 9 months per share: $2.73
Cisco Systems' management commentary on their 3rd quarter 2020 earnings report
SAN JOSE, Calif., May 13, 2020 /PRNewswire/ -- Cisco today reported third quarter results for the period ended April 25, 2020. Cisco reported third quarter revenue of $12.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.8 billion or $0.65 per share, and non-GAAP net income of $3.4 billion or $0.79 per share
"During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future," said Chuck Robbins, chairman and CEO of Cisco. "The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before. We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations."
"During this extraordinary time, our priority has been supporting our employees, customers, partners and communities, while positioning Cisco for the future," said Chuck Robbins, chairman and CEO of Cisco. "The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before. We remain focused on providing the technology and solutions our customers need to accelerate their digital organizations."
"We executed well in Q3 in a very challenging environment, delivering strong margins and non-GAAP EPS growth," said Kelly Kramer, CFO of Cisco. "The resiliency that we have been building into our business model is paying off, with software subscriptions now at 74% of our software revenue, up 9 points year over year. We are focused on driving long-term profitable growth while delivering shareholder value."
COVID-19 Pandemic Response
We have been focused on helping our employees, customers, partners and communities.
Employees
Customer and Partners
COVID-19 Pandemic Response
We have been focused on helping our employees, customers, partners and communities.
Employees
- 95% of our global workforce working from home.
- Seamless transition to work from home with a long-standing flexible work policy, and we build the technologies that allow organizations to stay connected, secure and productive.
- For the 5% who must be in the office to perform their roles, we are focused on their health and safety, and are taking all of the necessary precautions.
Customer and Partners
- Introduced a variety of free offers and trials for our Webex and security technologies as they dramatically shifted entire workforces to be remote. Announced $2.5 billion in financing with a new Business Resiliency Program through Cisco Capital to offer financial flexibility and support their business continuity. This will help customers and partners access the technology they need now, invest for recovery, and defer most of the payments until early 2021.
Cisco Systems (NASDAQ: CSCO) stock price history
The image below, obtained from Google, shows the stock price history of Cisco Systems (NASDAQ: CSCO) over the last 5 years. And it's been a very good time for Cisco stockholders. 5 years ago the stock of Cisco was trading at $29.50 and its currently trading at $41.95. Thats a return of 42.2% provided to Cisco stockholders
Cisco stock is trading at closer to its 52 week low of $32.40 than it is from its 52 week high of $58.26 which to us is a clear indication that the short term sentiment and momentum of Cisco is negative at this point in time.
Cisco stock is trading at closer to its 52 week low of $32.40 than it is from its 52 week high of $58.26 which to us is a clear indication that the short term sentiment and momentum of Cisco is negative at this point in time.
Recent Google search trends for CSCO stock price
The graphic below shows the Google search trends for CSCO stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows there is consistent interest for CSCO stock price over time, with searches peaking in mid August 2019 and in early April 2020
Recent coverage of Cisco Systems
The extract below shows recent coverage of Cisco Systems as obtained from TheStreet.com
Cisco Systems (CSCO) shares bumped higher Thursday after it posted stronger-than-expected third quarter revenues, and said work-from-home demand for tech gear and security support during the coronavirus pandemic would help support near-term sales for the network equipment maker. Cisco said adjusted earnings for the three months ending on April 25, the company's fiscal third quarter, came in at 79 cents per share, up 1.2% from the same period last year but 10 cents ahead of the Street consensus forecast. Group revenues, Cisco said, fell 8% to $12 billion, just ahead of the $11.7 billion analysts' estimate.
Looking into the current quarter, Cisco said non-GAAP earnings should arrive between 72 cents and 74 cents per share, with an operating profit margin of around 32%, on revenues of around $12.1 billion. WebEx, the company's video conferencing system, had more than 500 million participants in April, and analysts expect trial participants should translate into current-quarter sales.
Read the full article here
Cisco Systems (CSCO) shares bumped higher Thursday after it posted stronger-than-expected third quarter revenues, and said work-from-home demand for tech gear and security support during the coronavirus pandemic would help support near-term sales for the network equipment maker. Cisco said adjusted earnings for the three months ending on April 25, the company's fiscal third quarter, came in at 79 cents per share, up 1.2% from the same period last year but 10 cents ahead of the Street consensus forecast. Group revenues, Cisco said, fell 8% to $12 billion, just ahead of the $11.7 billion analysts' estimate.
Looking into the current quarter, Cisco said non-GAAP earnings should arrive between 72 cents and 74 cents per share, with an operating profit margin of around 32%, on revenues of around $12.1 billion. WebEx, the company's video conferencing system, had more than 500 million participants in April, and analysts expect trial participants should translate into current-quarter sales.
Read the full article here
Cisco (NASDAQ: CSCO) latest stock valuation
So based on Cisco Systems 3rd quarter 2020 earnings report what do we value Cisco stock at? Based on the latest earnings report of Cisco Systems our valuation model provides a target price of $41 per Cisco Systems stock
We therefore believe that the stock of Cisco Systems is fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $41. A good entry price into Cisco stock would therefore be at $36.90 or below.
We expect the stock of Cisco Systems to trade in a narrow range around its current price.
We therefore believe that the stock of Cisco Systems is fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $41. A good entry price into Cisco stock would therefore be at $36.90 or below.
We expect the stock of Cisco Systems to trade in a narrow range around its current price.
Next earnings release of Cisco Systems
It is expected that Cisco Systems will release their 4th quarter and full fiscal 2020 earnings report in mid August 2020