Cisco's Bleak Guidance Pus These ETFs In Focus

After the closing bell on Wednesday Nov 13, tech prime Cisco Systems (NASDAQ:CSCO) dampened investors’ mood when it reported first-quarter fiscal 2020 results as it sparked fears of a slowdown in global tech spending with a bleak outlook. However, the networking giant beat on both earnings and revenues.

Results in Detail

Earnings of 84 cents per share outpaced the Zacks Consensus Estimate by three cents and improved 12% from the year-ago earnings. Revenues rose 2% year over year to $13.2 billion and edged past the consensus mark of $13.02 billion partially on stronger software subscriptions (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).

Cisco expects revenues to decline 3-5% from the year-ago level and earnings per share in the range of 75-77 cents in second-quarter fiscal 2020. The low-end of both the ranges is below the Zacks Consensus Estimate of 2.72% for revenue growth and earnings per share of 80 cents. The weak outlook suggests that companies are postponing hardware purchases amid global political and economic uncertainty, including the China-U.S. trade standoff.

The bleak guidance pushed shares of Cisco down as much as 5% in after-hours trading on heavy volumes. The stock currently has a Zacks Rank #4 (Sell) and VGM Score of C. However, it belongs to a bottom-ranked industry (bottom 8%).

ETFs to Watch

Given this, the ETF world is also expected to see rough trading especially the ones which have the largest allocation to this network giant. Below, we have highlighted five of them (see: all the Technology ETFs here):

iShares North American Tech-Multimedia Networking ETF (ASX:IGN)

This ETF provides concentrated exposure to domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 21 securities in its basket, Cisco takes the fourth spot with 8.6% allocation. The product has accumulated $87.4 million in its asset base while seeing a lower volume of around 31,000 shares a day. Expense ratio comes in at 0.46%. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $1.1 billion in its asset base and trades in moderate volume of about 81,000 shares per day. The ETF charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, CSCO occupies the fourth position, making up roughly 7.6% of the assets.

First Trust Nasdaq Cybersecurity ETF CIBR

This ETF follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors. It has accumulated $1.1 billion in its asset base. The fund charges 60 bps in annual fees and trades in average daily volume of about 189,000 shares. In total, the product holds 46 stocks in its basket with Cisco taking the fourth spot at 5.9% (read: Play This ETF & Dump Stocks Unfit for Technological Disruption).

First Trust Dow Jones Internet Index FDN

This is one of the most-popular and liquid ETFs in the broad tech space with AUM of $7.6 billion and average daily volume of around 388,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 52 bps in fees per year. Holding 43 stocks in its basket, Cisco occupies the third position at 5.5%. The product has a Zacks ETF Rank #3 with a High risk outlook.

Invesco Dynamic Networking ETF PXQ

This fund follows the Dynamic Networking Intellidex Index, holding 29 securities in its basket. Of these, Cisco is the sixth firm, accounting for 4.9% share. The fund is relatively unpopular and illiquid in the broad technology space with AUM of $65.6 million and average daily volume of about 9,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Least-Hurt Tech ETFs on Renewed China Tensions).

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Cisco Systems, Inc. (CSCO): Free Stock Analysis Report

Invesco Dynamic Networking ETF (PXQ): ETF Research Reports

First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports

First Trust Dow Jones Internet Index Fund (FDN): ETF Research Reports

First Trust NASDAQ Technology Dividend Index Fund (TDIV): ETF Research Reports

iShares North American Tech-Multimedia Networking ETF (IGN): ETF Research Reports

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