Cisco Flat Ahead of Q3 2022 Report

US tech giant Cisco Systems Inc. is expected to report earnings on Wednesday, 16 November 2022 after market close. The report is for the fiscal quarter ended October 2022. Most analysts expect the company to announce earnings of $0.73 per share for the quarter.

Cisco last reported its earnings results back in August. The network equipment provider reported $0.74 earnings per share (EPS) for the quarter, narrowly missing analysts’ consensus estimates of $0.73. Cisco had a net margin of 22.91% and a return on equity of 31.12%. The company had revenue of $13.10 billion during the quarter, compared to analysts’ expectations of $12.78 billion. During the same period last year, the company posted earnings per share of $0.76. The company’s quarterly revenue was down 0.2% compared to the same quarter last year. On average, analysts expect Cisco Systems to post $3 EPS for the current fiscal year and $3 EPS for the next fiscal year.

The company has benefitted from the healthy uptake of identity and access, advanced threat, and unified threat management security solutions amid high Internet traffic growth. The Acacia purchase was a key catalyst. In addition to its expanding portfolio, with the launch of 8000 routers based on Silicon One, Nexus Cloud, Calisti, and Panoptica, Cisco also announced AppDynamics Cloud, the next-generation version of its observability platform for cloud native applications.

Cisco’s investments across its security business, focused on cloud-based offerings, are expected to drive growth. Cisco provided a strong outlook for fiscal first quarter 2023 and fiscal 2023.

Investors expect that the quarterly report will show moderate strength. Those who follow the networking giant anticipate sales growth of around 3% and a similarly small rise in revenue. It’s easy to overlook Cisco among the crowd of similar companies. However, this tech giant has a long legacy of success, and whatever it says in the report will have the potential to ripple throughout the tech sector.

Technical Review

Cisco Systems Inc. shares slumped 0.11% to $44.74 on Monday, making for a poor trading session for the stock market, with the US30 down -0.62% at the closing bell, the US100 falling -0.98% and the US500 down -0.89%. Cisco is still trading above its 26-day and 52-day exponential moving averages, and is below its 200-day exponential moving average. However, technical traders will consider the apparent divergence bias seen at the low prices of $41 and $38.56. The bullish pattern, also evident on the monthly period which formed 2 dominant candle patterns since the price tested $38.36, has rebounded up to the 23.6% FR retracement level.

On the daily period, the price still looks flat in the last 2 weeks. While the bias is stable, a move above $46.19 could test the high of $49.94 ($50) recorded in August. On the downside, the $42.25 support could force bulls to post another rebound. However, a move below this level also doesn’t rule out a test of the recent low. RSI is at 56.30 and MACD is still in the buy zone with the signal line parallel to the histogram.

Several research analysts have recently issued forecasts for Cisco prices. StockNews.com set a Buy rating for the company. Credit Suisse Group increased its price target from $60.00 to $65.00 and gave the company an Outperform rating. Barclays cut from an Overweight rating to an Equal Weight rating and lowered their target price for the company from $56.00 to $46.00.  According to MarketBeat, Cisco has an average rating of Moderate Buy and an average price target of $53.68. Cisco has a Zacks Rank #3 (Hold) and ESP in positive territory, and investors may want to consider this stock before the earnings report.

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Ady Phangestu

Market Analyst – HF Educational Office – Indonesia

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