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Gimme Credit comfortable with Cisco Systems buy despite revenue concerns

Published 02/23/2024, 01:24 PM
Updated 02/23/2024, 01:26 PM
© Reuters.  Gimme Credit comfortable with Cisco Systems (CSCO) buy despite revenue concerns

In a note on Friday, analysts at corporate bond research firm Gimme Credit said they are comfortable with their buy recommendation for Cisco Systems (NASDAQ:CSCO) bonds despite concerns following its earnings release a week ago.

Cisco reported Q2 EPS of $0.87, $0.03 better than the analyst estimate of $0.84, while revenue for the quarter came in at $12.8 billion versus the consensus estimate. However, its Q3 and full-year guidance missed expectations.

The company sees Q3 EPS between $0.84 and $0.86, versus the consensus of $0.92, while revenue for the period is seen from $12.1 billion to $12.3 billion, versus the consensus of $13.09 billion.

For the full-year, Cisco Systems sees FY2024 EPS between $3.68 and $3.74, versus the consensus of $3.86, with revenue from $51.5 billion to $52.5 billion, versus the consensus of $54.3 billion.

Gimme Credit said it expects steep declines in revenue for the company for the next few quarters, but they note Cisco is still maintaining share in three of its largest four markets.

"Subscription revenue continues to expand and is now 50% of the company’s total revenue," they wrote. "Meanwhile, margins have increased for three consecutive quarters, and we estimate they will be up for the full year."

"We remain comfortable with our buy recommendation, especially for longer term investors," they added. "Those with a shorter time frame may find better prospects elsewhere given the negative headline risk over the next six months or so. The new 10-year notes were issued at a spread of +75."

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