Tech investors will be focusing on Cisco Systems (Cisco Stock Quote, Chart NASDAQ:CSCO) today as it releases its quarterly earnings, with the stock trading lower this week, perhaps indicating a lack of confidence in the company’s ability to hit its targets. But overall, Cisco has done a terrific job at remodelling itself since its more difficult days of the early 2010s, says portfolio manager Gordon Reid.
“Cisco has been a bit like Microsoft, where they’ve reinvented themselves,” says Reid, President and CEO of Goodreid Investment Strategy, to BNN Bloomberg. “They’re getting into the cloud and now the hybrid cloud, which is storing some on the cloud and some in your server, which is very important for some financial institutions. They’ve done a really good job of transitioning away from routers and switches, which was sort of the old [past CEO] John Chambers way — and he did a very good job with Cisco.”
Cisco stock has been a good performer, but has pulled back with the rest of the tech sector
CSCO has been a stellar performer over the past couple of years, where it pulled itself out of the $28 range by mid-2016 to a high of $49.47 in early October of this year. Like the rest of the sector, however, Cisco has suffered a pullback over the rest of October and early November. (All figures in US dollars.)
For its fiscal first quarter 2019, analysts are expecting Cisco to produce revenues of $12.87 billion, representing a 6.1 per cent increase, and adjusted quarterly earnings of $0.72 per share, an 18 per cent increase. For last quarter’s fiscal Q4/18, Cisco produced earnings and revenue beats, with revenue coming in at $12.84 billion compared to the expected $12.77 billion and Earnings of $0.70 per share compared to the Street’s $0.69 per share.
Reid says that while praising Cisco’s turnaround, the stock isn’t in his portfolio.
“On a stock basis, I think there are better opportunities —Apple, Google and Facebook— and we think we’ll stick with those over Cisco,” he says. “We’ve made adjustments. We started trimming our FAANG stocks over a year ago and they’ve done very, very well for us over time.”
“We just want to make sure that when they run up, we take a little bit off the top, and that’s a very important principle for investors, especially in times like this, whether it’s at the asset mix level or at the company level,” he says. “Make sure everything is well constructed