Dow component Cisco Systems (CSCO) fell 4% on Thursday as bullish analysts called fiscal fourth-quarter results "good enough" but bears focused on continued weakness in its core computer networking business amid fierce competition with Arista Networks (ANET).
X The networking equipment giant has been shifting to software and services from its core business of selling network switches and routers. But JPMorgan was among the bears, lowering its price target to 31.50 from 33.
"We don't see an obvious end in sight to the switching and routing doldrums, though U.S. federal (spending) should continue to improve," Rod Hall, a JPMorgan analyst, said in a note to clients.
Tim Long, analyst at BMO Capital Markets, maintains a neutral rating.
"Cisco continues to lag its competitors in switching, and security revenue weakness highlights the lag between strong subscription growth and revenue timing," Long said in a note.
Late Wednesday, Cisco said adjusted earnings were 61 cents a share, down 3% from a year ago and in line with views, with revenue falling 4% to $12.1 billion, slightly above estimates. Revenue fell for the seventh straight quarter. Cisco forecast in-line October-quarter profit and revenue.
Cisco lost 1.30 to 31.04 on the stock market today. Arista, on IBD's Leaderboard, slipped 1.5% to 171.06.
For the current quarter, Cisco forecast unadjusted profit of 60 cents a share, down a penny from a year earlier and in line with estimates. Cisco forecast revenue of $12.1 billion, down 2% from a year earlier, and just above views.
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"We think the revenue profile could be close to bottoming in the near term," said Mark Moskowitz, a Barclays analyst in a report.
Amid slowing growth in older businesses, Cisco has stepped up the pace of acquisitions.
Mitch Steves, analyst at RBC Capital, said: "We think the results were good enough to keep the stock in the low 30s as Cisco continues to transition into a recurring revenue company."
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