Cisco's Security Segment A Bright Spot In Q4, BofA Says After Report Sends Stock Down

While Cisco Systems, Inc. CSCO reported in-line fourth-quarter Wednesday, the tech company's first-quarter guidance reflects a 10% decline in revenue due to weak orders across most verticals and product groups, according to BofA Securities.

The Cisco Systems Analyst: Tal Liani maintained a Buy on Cisco Systems and reducing the price target from $55 to $52. 

The Cisco Systems Takeaways: The company delivered an earnings beat of 7 cents per share, mainly due to lower taxes and some margin expansion, Liani said in a Thursday note. (See his track record here.)

The company booked around $100 million in COVID-19 related logistics costs in the quarter, the analyst said. 

Infrastructure platforms recorded a 16% year-on-year decline in revenue, with lower switching, routing, data center and wireless sales. Service provider revenues contracted by 5%, with weakness across regions.

“Despite near-term weakness, once the macro environment stabilizes, new cycles such as 5G, 400G, and 400ZR should drive growth across Infrastructure Platforms,” Liani said. 

Security was the bright spot in the fourth quarter, with 10% revenue growth driven by “broad portfolio strength, cloud security growth, and continued momentum with Duo and Umbrella,” the analyst said. 

A higher likelihood now exists of of merger-and-acquisition activity, as Cisco is looking to expand into “new adjacent growth areas,” he said. 

CSCO Price Action: Shares of Cisco Systems were down 11.42% at $42.60 at last check Thursday. 

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Photo courtesy of Cisco.