Shares in
Cisco’s
peers
Juniper Networks
and
Arista Networks
were falling early Thursday after the networking firm’s weak outlook. But the impact on its rivals may not be that bad, according to KeyBanc analysts.
Cisco
(ticker: CSCO) flagged a slowdown in new product orders in its fiscal first quarter and said customers were currently focused on installing products following strong deliveries over the past three quarters. It estimated there were one to two quarters of shipped product orders still waiting to be implemented by customers.
Product orders fell 20%, including a 26% drop in enterprise orders. Second quarter guidance for revenue and earnings came in below estimates.
The disappointing guidance spread negative sentiment across other networking stocks.
Arista
Networks (ANET) was 0.1% lower shortly after the open, recovering from earlier losses, Thursday, while
Juniper Networks
(JNPR) was down 3.8%.
However, KeyBanc analysts said the read-across to Cisco’s peers is not as negative as Wall Street might initially think.
“We view Cisco’s cuts as potentially limited in terms of read-through to peers Juniper and Arista, understanding Cisco is essentially ‘the market’ when it comes to certain segments, particularly Enterprise,” they said.
Arista said at its recent analyst day that its Enterprise unit continues to grow above the corporate average in 2023, they noted.
Cisco stock was worse hit, tumbling 11.6% in premarket trading. Oppenheimer analysts, maintaining an Outperform rating on the stock, said the opportunity still remains but that investors needed to be patient, and wait for its integration of
Splunk
(SPLK), which Cisco announced a $28 billion deal to acquire in September.
“For value investors that can be patient, the upside here is Cisco can do $4.50 to $5 EPS (earnings per share) post Splunk and stock can work to the mid 70s though patience is needed,” they said. They lowered their price target to $55 from $63.
Write to Callum Keown at [email protected]
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