Why Analysts Maintain Caution On Cisco Systems After Better-Than-Expected Fiscal Q3 Earnings

Shares of Cisco Systems Inc CSCO were relatively unchanged on Thursday after the company reported higher-than-expected revenues and earnings for its fiscal third quarter.

The report came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

Rosenblatt Securities On Cisco Systems

Analyst Mike Genovese maintained a Neutral rating, while reducing the price target from $53 to $52.

“Cisco beat and raised for 2HFY23, increasing FY23 (July) revenue guidance to 10% to 10.5%, from 9% to 10.5%, and EPS to $3.80-$3.82 from $3.73 to $3.78,” Genovese wrote in a note. He added, however, that the upside was due to backlogs, with a 23% year-over-year decline in orders in the third quarter.

“We are positive on the networking industry, and see Cisco as a share loser and more macro sensitive than most,” he added.

Needham On Cisco Systems

Analyst Alex Henderson reiterated a Hold rating on the stock.

“With supply constraints easing, Cisco shipped more product out of backlog resulting in upside to revenues, modest improvement in GMs, and solid operating leverage delivering upside to EPS,” Henderson said.

“But with improved availability, the time from Order to Shipment has come down over 40% and customers that had ordered out a year plus, don't need to order more,” the analyst stated. “As a result, orders decline sharply even as the comparisons get easier,” he added.

Check out other analyst stock ratings.

William Blair On Cisco Systems

Analyst Sebastien Naji reaffirmed a Market Perform rating.

“Cisco continued to see lead times improve in the third quarter, which is allowing it to ship out more product and reduce its backlog,” Naji wrote. The company noted, however, that customers are now waiting longer to place orders, “which is compounding with overall spending caution to reduce order growth momentum,” he added.

“Despite Cisco continuing to benefit from backlog drawdowns—normalization expected mid-fiscal 2024—we remain concerned about the organic demand trends for the company,” the analyst further stated.

KeyBanc Capital Markets On Cisco Systems

Analyst Thomas Blakey maintained a Sector Weight rating on the stock.

Enterprise orders declining 22% despite flat comparisons “may signal market share shifts,” Blakey said. He estimated a backlog drawdown of around $3 billion in the fiscal third quarter.

Peers like Arista Networks Inc ANET and Juniper Networks, Inc. JNPR “appear to be gaining share in certain segments here albeit off a smaller base,” the analyst further wrote.

CSCO Price Action: Shares of Cisco Systems are up by 0.13% to $47.69 at the time of publication on Thursday.