Cisco Systems (NASDAQ:CSCO) reported a good Q1/2020 report on Nov. 13 but issued a light outlook. Its trouble could represent the proverbial canary-in-the-coal-mine analogy.
Cisco reported a non-GAAP EPS of $0.84. Revenue rose 0.7% to $13.16 billion. But the Q2 revenue guidance of negative 3% to negative 5% decline year-over-year is disappointing. This weak outlook is not as disheartening as Arista’s outlook but was enough to send CSCO stock down after its earnings report.
Even though the outlook is poor, Cisco reported areas of strength. Revenue from Security grew 22% while Applications grew 6%.
As usual, analysts were late to downgrade CSCO stock. Trimming the price target is proving damaging to the stock and to the sector. Investors could take advantage of the drop in the stock to average down. Alternatively, holding Nokia (NYSE:NOK), Juniper (NYSE:JNPR), and Ericsson (NASDAQ:ERIC) would work out too. Nokia is trending near 52-week lows after reporting a weak quarter, too. Its 5G business slowed in the quarter.
Patient investors could take advantage of the impatient market by buying NOK and CSCO stock. By knowing that sales boosts come in phases and is not predictable, traders could buy into the dip. When orders recover, the stock will rebound as these firms post better quarterly results.
Disclosure: The author owns NOK stock.
