Can Cisco make a comeback?November 9, 2012: 12:11 PM ET
Is cash (or caysh if you pronounce it like Cisco Systems CEO John Chambers) king? We may find out Tuesday. Cisco (CSCO) reports earnings after the closing bell on Tuesday.
It's been a tough year for the networking giant. Shares are down 6.5%, despite the fact that it has nearly $50 billion in caysh on its balance sheet and is putting a lot of it to use with a dividend. Cisco's quarterly payout now yields 3.3%. That's more than double the rate of a 10-year U.S. Treasury note!
Shares did gain nearly 1% Friday even though the stock was downgraded by analysts at JPMorgan. And to be fair, Cisco is hardly the only company in its sector that is struggling. Shares of smaller networking competitors Juniper (JNPR), F5 Networks (FFIV) and Alcatel-Lucent (ALU) have all taken a bigger beating in 2012. But it has to sting Cisco longs that the company has fared so poorly while most big tech stocks are having a solid year.
Nonetheless, it's hard to find too many fans of Cisco these days. Traders on StockTwits seem to think that the company's transition from growth stock to value stock is now fully complete. With shares trading for less than 9 times fiscal 2013 earnings estimates, it would appear they are right. And the problem for investors throughout tech is that Cisco remains a bellwether. If Chambers issues a gloomy forecast for his company, that could mean bad news for a lot of companies.
As dominant as Cisco is in its area, it can't overcome the fact that there is little growth in the business right now. Analysts are only predicting annual sales increases of 6% in fiscal 2013 and 2014. So investors that might find Cisco attractive have to keep hoping for more dividend increases. And some worry that could be in jeopardy due to President Obama's re-election and the battle over the fiscal cliff.
Still, one trader thinks that more infrastructure investments from telecoms like AT&T (T) could be good for Cisco and the rest of the sector.
Another investor said that Cisco may be too cheap to pass up given its fundamentals.
And now for the Reader Comment of the Week. Sure, there was a lot of chatter about that election thing and the fiscal cliff. But many of my Twitter followers seem to be far more interested in the recent train wreck that is Apple's (AAPL) stock. Shares are now more than 20% below their all-time high from September, putting the iEverything maker into bear market territory.
One follower pointed out that Apple is now a victim of lofty expectations. Even though opening weekend sales of the comapny's iPad Mini and 4th generation iPad were strong, investors still hunger for more. For perfection.
Ha! To continue with the soccer (sorry, football) comparisons, Apple's stock is sadly doing about as well as Manchester United (MANU) since its IPO this summer.